The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has been urged to expand Hurricane Joaquin-related tax breaks to storm-devastated businesses, with the private sector also calling for an amended relief model that would act as an “economic stimulus” throughout the Bahamas.

The Bahamas Chamber of Commerce and Employers Confederation (BCCEC), in a letter sent to Prime Minister Perry Christie on Monday, said households/individuals should not be the sole beneficiaries of the Customs duty and Value-Added Tax (VAT) exemptions granted in previous Joaquin ‘exigency’ orders.

The Chamber pointed out that such tax breaks were essentially meaningless unless businesses on the storm-ravaged islands were able to also rebuild, otherwise residents would lack the jobs and incomes to translate initial relief into a sustained recovery.

The February 15 letter, a copy of which has been seen by Tribune Business, also warns that the current exigency model “inadvertently encourages” residents in the southern and central Bahamas to purchase building materials and other essential supplies abroad.

Warning that this “is to the direct detriment” of the Bahamian economy and wider business community, the Chamber is calling for a reformed exigency model that would allow local companies to sell products to storm-hit communities at prices that excluded duties and VAT.

It is proposing duty and VAT ‘refunds’ on the products sold by local companies to persons - and businesses - qualifying for the exigency, on the grounds that this would boost domestic economic activity and make Bahamian merchants “price competitive” against imports.

Edison Sumner, the Chamber’s chief executive, yesterday explained that the proposal was designed to achieve the twin objectives of restoring the affected islands’ economies while simultaneously boosting the wider private sector.

“We just feel that given the situation in the economy, we want to encourage as much local participation as possible,” Mr Sumner said, when contacted by Tribune Business.

“While there are businesses that benefit from imports of product, we feel more will benefit if we get those [businesses] impacted to shop around with local suppliers.”

The Chamber chief executive added that storm-hit residents/businesses would not be prevented from sourcing building materials and other essential equipment from abroad, especially if the supplies they needed were unavailable in the Bahamas, or not priced competitively.

“In this kind of environment, given the economic realities we are facing, we think it’s incumbent on us to support as many Bahamian businesses as we can, especially in this case, where many businesses in the Family Islands have shut down,” Mr Sumner said.

“We want to do as much as we can, as quickly as we can, to get those businesses back up and running, so that once again they become the drivers of these economies.”

He reiterated that unless the recovery path for Joaquin-devastated businesses was also smoothed, the long-term sustainability of the economies in the affected islands - Long Island, San Salvador, Rum Cay, Acklins and Crooked Island - was also in jeopardy.

The Chamber’s letter, signed by Mr Sumner and its chairman, Gowon Bowe, noted that the first Tariff Act exigency was declared on October 6, 2015, and subsequently extended for a further 90 days on January 5.

“This relief was intended solely for residents, and did not extend to businesses in the affected islands,” the duo wrote.

“The BCCEC is hereby requesting that tax relief similar to that provided in the declaration of exigency (duty and VAT exemptions) for residents be extended to qualifying businesses.

“Such businesses are the engines of these islands and, very candidly stated, without restoration of businesses to generate employment and circulation of funds, the existing declaration of exigency will not benefit the very persons it seeks to assist - such persons have no means of income to acquire goods necessary for restoration without these businesses being restored and employment reignited.”

Messrs Bowe and Sumner described small and medium-sized businesses as “the lifelines of the communities” in those islands slammed hardest by Joaquin, providing jobs, incomes and essential supplies.

Apart from extending the exigency’s tax relief to include building materials and supplies “necessary to restore [business] operations’, the Chamber also recommend that the relief model be ‘tweaked’.

Given that it was currently easier for residents in the affected area to access tax relief ‘at the border’, Messrs Bowe and Sumner said this was encouraging them to patronise foreign suppliers at the expense of Bahamian businesses.

“The current declaration of exigency, inadvertently, encourages residents to patronise foreign suppliers, as duty and VAT exemptions can be directly claimed at the time of importation,” the Chamber told the Prime Minister.

“This is to the direct detriment of businesses both in the local communities in the affected islands, as well as the wider business community in the Bahamas.”

As a result, Mr Bowe and Mr Sumner called for the exigency programme to be “modified”, so that Bahamian companies could sell “qualifying materials” to Joaquin-battered residents and businesses at prices that did not include duty and VAT.

Vendors would also receive duty and VAT refunds from Bahamas Customs, and the Chamber letter added: “This would facilitate greater commercial activity in the Bahamas, as local suppliers can be price competitive with foreign suppliers.

“The BCCEC believes that the two requests [here] would be tremendous initiatives that can use the tragedy inflicted by Hurricane Joaquin to effect economic stimulus to affected communities.

“This supports the concept of value for money, as the relief funds will have the dual impact of providing relief and stimulating economic recoveries for long-term, sustainable growth.”

Further explaining the rationale for this proposal, Mr Sumner told Tribune Business yesterday: “We are looking to encourage more support for local Bahamian businesses, or else people might not go ahead to purchase supplies and patronise them.

“Hopefully it will increase traffic to their stores and increase sales.”

The Chamber said business needs in the storm-hit islands were “immediate”, and its proposed initiatives could be implemented swiftly with the Government’s approval.

It added that it had already met with Customs to discuss the administrative procedures required to oversee them, such as determining which businesses were eligible to participate; the materials and supplies that qualify for relief; and how companies could apply for the tax breaks and request refunds.

Acknowledging that safeguards were required to prevent fraud and corruption, the Chamber added: “It would be imperative that refunds for businesses, which did sell goods to eligible residents/businesses exclusive of duty and VAT, are made in a timely manner.”

In return for approving its proposal, the Chamber said it was mandating that businesses who receive assistance “become or remain compliant” with the Business Licence Act, and register for VAT if necessary.