The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Business costs will increase by more than the proposed Value Added Tax’s (VAT) 15 per cent rate, a senior private sector executive warned yesterday, due to the need to implement new accounting and bookkeeping systems.

Conceding that the July 1, 2014, implementation deadline “may be aggressive”, Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, said the private sector would have to cope with more than just a 15 per cent rise in the cost of input goods and services.

Suggesting that companies may have to hire more ‘back office’ employees to cope with VAT’s demands, Mr Sumner said the BCCEC was set to deliver its own ‘position paper’ on the tax to the Government “very shortly”.

At one point indicating that this might happen within the next 14 days, the BCCEC chief executive said the business community had raised “varied concerns” over VAT, particularly how it was going to be implemented and managed, and how they would be impacted.

His predecessor as BCCEC chief executive, Winston Rolle, also told Tribune Business that the Bahamian business community continued to be plagued by “a lot of uncertainty” over VAT.

“There are a lot of business persons out there concerned about how VAT will increase their product price levels, and whether we are going to have a similar model to Freeport with bonded and non-bonded goods,” Mr Rolle said.

“There’s still a lot of uncertainty about how VAT will work and impact them. There’s still a lot of education and dialogue that needs to take place for people to understand what happens with VAT.”

Mr Rolle said there had been no “detailed” information provided to the Bahamian private sector to-date, other than the Government’s initial White Paper, which just set out the broad outline for how VAT would work and attempted to justify its implementation.

“How’s that going to be done in conjunction with Customs duties?” Mr Rolle added of VAT’s implementation. “Does that mean Customs duties are going to fall away, because if you’re not, you’re still paying costs at the point of entry by whatever percentage that is.

“That’s why I was expressing concern about being able to implement VAT by July 2014.”

Mr Sumner, meanwhile, said the BCCEC had established a VAT committee and was reviewing the Government’s White Paper.

He explained that the organisation was looking to “formulate a consensus”, and was consulting with - and getting feedback from - the business community on how VAT would affect them individually.

This, Mr Sumner added, will lead to the development of a formal VAT position paper that the BCCEC will present to the Government.

“We’re still working through the details of it, and expect to have a position on the VAT - a paper - put to government very shortly,” he told Tribune Business.

“There are varied concerns about VAT implementation. We have had some concerns expressed about the general implementation of it, how it’s going to be managed, who’s going to be affected. There are a number of implications.”

On the timetable for implementation, Mr Sumner said the BCCEC and private sector were prepared to work with the Ministry of Finance and its VAT steering committee to see whether the implementation deadline - the start of the 2014-2015 Budget year - was realistic.

“I think the programme and timeframes for implementation may be aggressive, but we also know there are a number of elements working behind the scenes to get it done,” he said. “

“The timetable was one of the things we expressed concern about, and we are prepared to work with it to see if it is reasonable - whether it is doable or too aggressive.”

Mr Sumner said VAT would impact all Bahamian businesses, big and small, adding: “You’re talking about increasing the cost of doing business by 15 per cent.

“You have to programme systems, and put in monitoring and controls, so significant adjustments have to be made by businesses affected by VAT. It’s going to be a new expense line for firms, and is going to change the way business is done in this country.”

While the cost of goods and services may rise by 15 per cent, Mr Sumner warned that the “spin-offs will affect more than that”, in terms of the costs associated with hiring persons to run the new accounting systems implemented. As a result, the cost of doing business in the Bahamas would likely rise by more than 15 per cent.