The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas could become “the shopping mecca of the Caribbean” and boost the economy “ten-fold” if it was easier for retailers to do business, with one proprietor yesterday warning that Value-Added Tax (VAT) was likely to cause job losses.

Sarah Hug, principal of downtown designer wear retailer, Sarah’s Secrets, told Tribune Business that high import tariffs and other overheads, most of which were incurred ‘up front’, meant Bahamian retail “is not working”.

Disclosing that her business has “not made money” since 2009, although paying all its bills, Ms Hug said VAT’s demands - particularly the need for new accounting systems and filing to government by the 21st of the following month - “seem crazy”.

Bahamian retailers are set to meet today at the Carmichael head office of Rupert Roberts’ Super Value with the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) Coalition for Responsible Taxation.

The meeting is intended to allow retailers and wholesalers to elect representatives to the Coalition, giving them a direct voice and input into the private sector’s advocacy efforts on VAT and tax reform. It will thus bring them formally into the Coalition fold.

“We don’t have a voice; never had one,” Ms Hug said of Bahamian retailers generally. “In order for us to survive, we have to let it be known that these are difficult times, and there are a lot of jobs going to be lost if we don’t have the time to figure this out. It’s scary, scary times.”

While a Bahamian Retailers Association has been in existence, its membership has largely comprised food stores. Ms Hug expressed particular concern about the potential impact VAT may have on small and medium-sized businesses.

And she pointed out that tax reform was coming at a time when the retail industry was already struggling.

“I think that retail and tax reform needs to be addressed, period,” Ms Hug told Tribune Business. “Retail is not working in this country for several reasons.

“There’s a few thing that, if they were put in place, we could become the shopping mecca of the Caribbean, but it doesn’t seem as if we want to see that. We could turn this economy around 10-fold.”

With an average import tariff of 35 per cent, coupled with “all the hidden taxes” and items such as shipping costs, she explained that by the time inventory landed in the Bahamas, the cost of getting it here was much higher than just the Customs duty.

Then came the “very high overheads”, with electricity bills “like a mortgage”. With most consumers now having access to the Internet, and able to compare prices for the same product between countries, Ms Hug said many US tourists who visited her store “felt ripped off” in comparison to costs at home - not realising her prices were inflated by taxes and high operating costs.

“It’s just very difficult to operate. You cannot compete with US prices at 35 per cent duty,” Ms Hug said, explaining that this was why she was increasingly stocking European brands.

She called for the Government to alter its import tariff structure so that retailers did not have to lock-up so much working capital in upfront inventory costs.

Rather, she recommended that the Government earn its taxes from retailers at the back end via Business Licence fees.

And Ms Hug also called for the Government to broaden its ‘luxury goods’ category beyond jewellery and perfume.

Such products attract a 10 per cent import tariff, and she suggested this treatment be applied to the designer clothing she and other retailers sold as a means of encouraging Bay Street to be “filled with more than jewellery, clothing and t-shirts”.

Arguing that these constraints explained why so few entrepreneurs were venturing into the retail business, Ms Hug said those aspiring owners she helped with business plans often reacted: ‘My God, how did you actually open?’ when she showed them the costs involved.

“They don’t understand business, a lot of people at the top,” she added. “I have been willing to sit down with ministers, show them the books so they can see how we operate. It’s never happened.”