The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to “shake the tree harder” with the existing system before turning to Value-Added Tax (VAT), a key player in the fledgling Bahamian Federation of Retailers warning this nation was unlikely to buck the region’s “unsuccessful implementation” trend.

Tara Morley, Cole’s of Nassau’s general merchandising manager, told Tribune Business the Government should focus on the uncollected “low hanging fruit” under the current tax structure before contemplating VAT’s introduction.

Warning that VAT would cause the closure of “tons of stores”, Ms Morley said it would further raise consumer prices in an environment where Bahamian retailers were already uncompetitive against Florida and New York-based rivals.

Pointing out that tourists were easily able to compare Bahamian retail prices with those at home via the Internet, Ms Morley recalled how Cole’s lost a $3,000 sale last week after a visitor chose to make their (cheaper) purchase post-vacation.

Emphasising that it was critical to lower import/Customs duties if the sector was to make inroads into the $1 billion-plus spent by Bahamians in Florida annually, Ms Morley said the planned Federation was also looking beyond the immediate VAT issue “to develop a stronger retail industry”.

Speaking ahead of today’s meeting to formalise the Bahamian Federation of Retailers’ creation and vote on its leadership committee, she told Tribune Business that more than retailers had signed up to receive its e-mail messages.

“We’ve had a huge level of interest,” Ms Morley said. “We’re receiving half a dozen e-mails daily from people wanting to be added to the distribution list.”

Ms Morley is one of the main organisers/drivers for the Federation’s formation, the others being Etienne Christen, operations manager at Lebco Ltd, and Sarah Hug, proprietor of Sarah’s Secrets.

She said Ms Hug, in particular, had done much work to raise awareness among Bay Street and downtown Nassau retailers about the potential impact from VAT, and the need to address it with the Government.

Now hoping to do similar in other prime retail districts, such as Carmichael and Palmdale, Ms Morley said of the proposed Federation: “It’s something the Bahamas has been lacking for a long time now: A unified retail voice.

“I moved back with my husband in July this year, and was surprised to find an organisation like this didn’t exist. That’s something the Bahamas is really lacking right now.”

She added that VAT’s impending implementation had helped to bring the Bahamian retail community together and set aside competitive rivalries.

Ms Morley suggested the organisation would be modelled along the lines of the US’s National Retail Federation, which held conferences and worked to promote and grow the industry.

And, while VAT/tax reform was the immediate issue, she suggested that the Bahamian Federation of Retailers would also have its eye on the industry’s long-term future.

“If we do get together and form as a voice, there’s an opportunity to have a strong future for retail in the Bahamas,” Ms Morley told Tribune Business.

“Not just opposing the VAT, the Bahamian Federation of Retailers will be working together to develop a stronger retail industry in the Bahamas and developing alternatives to VAT.

“That’s another point we’re trying to communicate to the group. We need to be creative about the ways to resolve the Government’s revenue issues. We do understand something needs to occur.”

Drawing on the experience of her family, which is steeped in the Bahamian real estate industry, Ms Morley said there were numerous tax ‘loopholes’ and exemptions that the Government needed to close before even considering VAT.

Pointing to the fact Bahamian-owned properties in the Family Islands were exempt from real property taxes, she questioned: “Why should Bahamians not all be treated equally?

“There seems to be more low hanging fruit and opportunities for the Government to collect revenue that they’ve not brought up.

“Before the Government moves forward with VAT implementation, they need to shake the tree harder and get more low hanging fruit that way.

“There just seems to be so many different areas where they can enforce taxes better, or implement new and strengthened taxes.”

As for VAT’s likely impact on Bahamian retailers, Ms Morley said it would make the sector even more uncompetitive with price-conscious consumers.

“It’s going to cause incredible inflation in the prices, especially in an economy where prices are already so high,” she told Tribune Business. “It’s going to deter not only locals, but tourists, from shopping.”

Noting that visitors were constantly comparing Bahamian retail prices to those they found at home, Ms Morley said she found herself having to frequently explain how the existing import tariff system meant prices in this nation were higher.

Recalling an example from last week, Ms Morley said: “We lost a $3,000 sale because the lady said she’d wait to go home. She was planning to purchase multiple units. She bought one or two things, but said she’d purchase the rest back home. That happens daily.

“We can entice them with offering and diverse selections, but at the end of the day price matters, and there is only so much the consumer is willing to bear.”

With average tariffs of 35 per cent already making Bahamian retail prices uncompetitive, Ms Morley recommended that these be cut to around 10 per cent to bring them into line with Florida.

If this happened, she suggested that the volume of purchases by Bahamian and tourist shoppers would increase, more than compensating the Government for the reduced tax rates via the increased sales. And the balance of trade would improve.

“We’re really competing with Florida,” Ms Morley told Tribune Business. “We lose so much money, whether $1 billion, $2 billion or $3 billion, annually.

“If we were able to have more competitive pricing structures in the Bahamas, we would have Bahamians spending that money in the economy, rather than have it go out of the economy.”

Now VAT is entering the mix. “I think we’re going to see tons of stores closing down,” Ms Morley said. “It’s really going to hurt cash flow for businesses, and I feel like it’s going to separate the big guys from the small guys, as the small guys will get hit first.

“It will make it an even harder environment for entrepreneurs to come in and operate in the retail industry. We’ll see less entrepreneurs come in, and more of a black market than we already have. You’ll see a significant percentage of stores shutting their doors.”

Ms Morley said small retailers with annual turnovers of less than $100,000, and who would not have to register to pay VAT, would still see their costs increase as they will be unable to claim refunds for the tax paid on their inputs.

Calling for the Government to “at least defer” the July 1, 2014, VAT implementation date, Ms Morley expressed hope it would ultimately adopt an alternative tax reform.

“This doesn’t make sense,” she added. “No Caribbean economy has implemented it correctly, and there’s absolutely no reason to believe the Bahamas is going to be an exception to the rule.”