The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ Caribbean rivals “would love us to implement Value-Added Tax (VAT”, a Tax Coalition co-chair believes, because any increase in costs further undermines this nation’s ‘US proximity’ advantage.

Robert Myers told Tribune Business that avoiding any further increase to the cost of doing business was the “overriding” concern driving the private sector’s Coalition for Responsible Taxation.

He pointed out that the Bahamas’ position as a high cost destination had hurt it during the recession and its aftermath, with stopover visitors prepared to fly further to cheaper destinations such as Jamaica and the Dominican Republic.

And, with CIBC FirstCaribbean this week announcing plans to cut its Bahamian workforce by 66 jobs, in addition to the 74 already allowed to leave voluntarily, Mr Myers said the Bahamas should be “worried” that businesses were also migrating because of high operating costs.

The Tax Coalition co-chair explained that the likely increase in business costs, and consumer prices, resulting from a 15 per cent VAT was why the private sector was so concerned about this tax reform option.

Fearing VAT will add another layer of expense to an already-high cost base, Mr Myers told Tribune Business: “We need to be thinking the other way; how do we reduce our costs of doing business.

“Our costs are too high. Anything that increases the cost of doing business is detrimental at this point. That’s our overriding concern. We’re already too expensive as a jurisdiction.”

Translating this into the context of the Bahamas’ international competitiveness, Mr Myers added: “Our competitor neighbours would love us to implement VAT. Every time we go up in costs, it gives them an edge, and people are more willing to fly on further.”

The Tax Coalition co-chair said the Bahamas’ ‘high operating cost environment’ was thus undermining one of the traditional competitive advantages it held over Caribbean rivals - its proximity to the US.

“The more expensive we get, our proximity gets less and less relevant,” Mr Myers added. “As our value declines, people fly over us to Cuba, the Dominican Republic and Jamaica. Canadians are going to Cuba in droves, because they are way more cost effective. We have to be cognisant of that.”

The Tax Coalition co-chair said such issues were also spilling over into the domestic economy, as evidenced by CIBC FirstCaribbean’s downsizing and the likelihood that Royal Bank of Canada (RBC) and Scotiabank will follow suit.

“I think what you are seeing is the business community reacting to the high costs of operation,” Mr Myers said. “This should be a sign to the Government that what we have been saying is a reality, which is that if we’re not competitive we’re going to lose market share.”

He added that such issues would impact the Bahamas’ ability to attract both foreign direct investment (FDI) and tourism, and said: “Productivity, efficiency, the ease of doing business, accountability.

“These are all big drivers, and what seems to be being raised is the cost of doing business here is extremely high.

“When you take into consideration the duties, the fees, the taxes, and utility costs and labour costs being very high, you realise this is not a tax free society. A lot of it is just hidden,” Mr Myers added.

“You start to see that migration of businesses, and people need to be worried. People will find value, and if we do not provide value, politically or for our dollar, people will migrate to cheaper destinations or sources. They’re going to do it whether we like it or not. When costs become egregious, people migrate to other areas.”

Mr Myers said this would apply to both Bahamian and foreign-owned businesses based in this nation, and he added: “We’ve been saying there’s a limit: Tourist or business, they will not pay any more and will walk out the door.”

Much of this, he argued, was being driven by public sector inefficiencies, and there would come a time when the Government could no longer pass the resulting costs on to businesses or the consumer.

And Mr Myers said those calling for laws to stop Bahamas-based businesses outsourcing functions and jobs overseas were “missing the point”, which was this nation’s competitiveness.

“We stop it by being competitive, efficient and providing value,” Mr Myers told Tribune Business. “If we don’t provide value, people will go to other places.

“We’ve got to think more out of the box, and need a more comprehensive plan than just a tax plan. We’re not hearing enough of that.”