The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Determining Value-Added Tax’s (VAT) impact on the private sector is “a complete crapshoot” until the Government provides more details, a leading businessman fearing it could push the Bahamas back into recession if mishandled.

Robert Myers, who heads companies including Caribbean Landscape and VTrade, told Tribune Business it was impossible for Bahamian businesses to assess how VAT would impact them without first seeing the accompanying legislation and revised Tariff Schedule

Emphasising that he was not speaking in his capacity as the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) vice-chairman, Mr Myers said there were “too many unknowns” - even though VAT’s supposed implementation is now less than 14 months away.

Having attended several meetings between private sector organisations and the Government, Mr Myers said “conflicting” information was being given, with two different post-VAT ‘average import tariff rates’ being given in two separate meetings.

Government officials, he added, were also failing to provide specifics in response to questions seeking details, yet were trying to convey the message: ‘Trust us’, and ‘Don’t worry, we’ve got it all under control’.

And, emphasising he was “not anti-VAT”, Mr Myers expressed particular concern about the tax’s impact on maintenance services businesses, telling Tribune Business the sector could be “whacked”.

“The long and short of it is that I don’t think any of us can comment on the basis of the White Paper,” Mr Myers said of the tax reform’s likely impact. “I’ve attended two meetings [with government], one with BICA (the Bahamas Institute of Chartered Accountants), and one with the Chamber. There’s so many unknowns, and they don’t seem to want to answer it.

“They put this out there, but if you ask the tough questions they say: ‘We’ll take this under advisement, take it under consideration. Until we see the legislation, it’s a complete crapshoot. The devil’s in the details.”

Michael Halkitis, minister of state for finance, last week said draft VAT legislation could be ready as early as this week. But Mr Myers said this would have to be read in conjunction with a revised Tariff Schedule, which would show how much each individual import tariff will decline to compensate for VAT’s imposition.

He added that discrepancies were already appearing in the Government’s position on what the average import tariff rate will be post-VAT. The BICA meeting was told the average rate would fall from 35 per cent to 20 per cent, but the BCCEC was told in its meeting with government that the latter figure would be 10 per cent.

“I think the White Paper was very helpful and gave people an opportunity to reflect,” Mr Myers said. “It was the right thing to do, but we’e got to wait and see what the Tariff Schedule is, and what the tariffs are going down to. As a businessman, I’ve got to wait and see what the Tariff Schedule and legislation is going to say.”

The Tariff Schedule will also have to co-ordinated with the Bahamas’ trade liberalisation commitments under the World Trade Organisation (WTO) and Economic Partnership Agreement (EPA).

Mr Myers, meanwhile, expressed concern that the Bahamian economy, and workforce, would suffer far-reaching negative consequences if VAT’s implementation was not done correctly.

“I’m very concerned about the inflation [effect], and if we don’t get it right it potentially has a significant impact on the cost of living,” he told Tribune Business.

“It could potentially push us back into recession, taking away discretionary spending and causing people to clam up again. I’m very concerned that at a time when we’re just starting to see some modest improvement from the significant losses we’ve suffered since 2008 that we don’t get pushed back into a stagnant economy.”

A landscaper himself, Mr Myers said he was “really worried” about the impact VAT will have on that industry and others - such as plumbers, electricians, carpenters, contractors, painters and pool services/repairs.

All were now faced with adding 15 per cent to consumer bills, and Mr Myers told Tribune Business: “The services business is going to get whacked.

“There’s massive potential to lose thousands and thousands of customers, because people are going to go out and hire Haitians to paint their house. I raise my prices now by 2-3 per cent to account for inflation, fuel costs and other equipment costs, and I get push back from customers.

“You say I have to raise it by 15 per cent, I’m going to have to face a fall-off in business, and people are going to face loss of employment. If it’s significant, I’m going to have a field day at the Labour Board.

“I don’t see why, if a government policy makes me lose business, I have to pay severance pay if I have to lay-off a couple of crews. Who’s going to pay for that?”

Mr Myers told Tribune Business that the Government, in meetings, had verbally agreed to provide credits for companies’ inventory that had failed to move prior to July 1, 2014, yet been subject to the existing, higher import tariff rates. Such stock would otherwise then be exposed to the ‘double whammy’, or double taxation, through a 15 per cent VAT.

However, the businessman said he wanted to see this written into legislation. “These are things that have to be looked at on a case-by-case basis,” Mr Myers said. “It’s going to be a challenge for all of us. It’s a big change.”

He also pointed out that Bahamian companies importing heavy duty, heavily-taxed equipment now faced placing themselves at a competitive disadvantage against rivals who did so after VAT, and lower import duty rates, took effect.

Apart from the 15 per cent VAT levy itself, Mr Myers added that for the 4,000 Bahamas-based companies that would have to register to pay it, there would be the added cost of implementation.

“You’re not going to get away with a slack bookkeeper any more,” he said. “There will be more investment in systems, retraining people, getting new people. You’re talking about very small nuances that are going to make a big difference.”

Emphasising that he was not opposed to a VAT, Mr Myers indicated he thought the July 1, 2014, implementation deadline too ambitious for the Government and private sector to get it right first time.

“I understand there’s a need to raise revenues, and I understand there’s a need to get a more equitable tax than duties, as they are a regressive tax. I’m not anti-VAT; I just think we’ve got to do it in the right way,” Mr Myers told Tribune Business.

“I said to them [the Government] at the meeting the other day: ‘Why are we rushing? Slow it down’. We understand the need to raise revenue, but this will have a far-reaching effect. You push us back into a slump, people cease spending........ I don’t know.

“I feel for them. I wouldn’t to make a decision either. VAT could be a real game changer. I’m not negative; I’m just saying we need to know the details.”