The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has “clearly got its marching orders” on Value-Added Tax (VAT) from the International Monetary Fund (IMF), a co-chair for the private sector’s Tax Coalition warning that it was “highly likely” the latter was telling the Christie administration what to do.

Robert Myers told Tribune Business that it was difficult not to believe the Government was taking orders from the Washington-based Fund on VAT’s implementation unless studies on the new tax’s economic impact were released publicly.

Arguing that both the IMF and the Government were being ‘irresponsible’ in pushing forward to implement VAT by July 1, 2014, despite the increasing opposition, the businessman called on the Fund to put “skin in the game”.

He called on the IMF to, if it was “so sure” that VAT was the right option for the Bahamas, sign a contract where it guaranteed to relieve a portion of this nation’s debt burden if the tax reform backfired.

And Mr Myers also questioned the IMF/Government expectations that the $2.6 billion Baha Mar project would fuel this nation’s economic growth, saying no studies had been produced to disprove the fear that the new resort would end up splitting - not growing - the high-end visitor market with Atlantis.

Mr Myers, who jointly heads the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) Coalition for Responsible Taxation, was responding after the IMF’s statement on its Article IV mission urged the Government “to deploy all efforts and resources” to both hit the VAT implementation deadline and win more support for the reform.

Confirming that fellow Coalition co-chair, Gowon Bowe, and others had met with the IMF during its visit that ended on Saturday, Mr Myers said the meeting only raised “more questions and the concern that they’ve done the right analysis”.

“They clearly don’t have broad-based support,” he told Tribune Business. “They’ve [the Government] clearly got their marching orders for implementation from the IMF, but clearly we don’t support their broad-based support concept.”

Mr Myers said the discussion kept coming back to the Coalition’s belief, and that of others, that neither the Government nor the IMF were taking “the responsible approach” over VAT and the wider tax/fiscal reform issue.

This, he added, stemmed from the fact that neither had released a ‘dynamic economic impact analysis’ of the impact VAT, and other potential tax reforms, would likely have on the Bahamian economy.

While the draft VAT legislation and regulations have been released to select parties, the Government has yet to reveal the revised Tariff Schedule or economic impact studies.

The Inter-American Development Bank (IDB) is undertaking such a study, but this is thought to be incomplete and has not been disclosed, although the Government has drawn upon this to assert that VAT’s inflationary impact will be no more than 5-6 per cent.

Asked whether he thought the Government was merely doing what the IMF was telling it to do, in relation to VAT, Mr Myers told Tribune Business: “That’s highly likely.

“Unless they can give us the economic impact analysis, we have no choice but to think that...... to assume that’s the case.”

Mr Myers again asked where the VAT economic impact study was and, if it was in existence, “on what basis did you draw these conclusions”.

Asking the IMF and the Government “on what basis have you concluded this [VAT] is the right thing to do”, he added: “The transparency here is critical.

“Do we trust the IMF is right, or slow things down? If we put a band aid on this, it might be a bigger problem in three-four years time. Yet it might be a bigger problem in a year-and-a-half if the economy regresses.

“That’s the big danger here and why we’re saying: ‘Guys, slow this thing down. Do not let the blind lead the blind. No one’s pushing here. Let’s take a breath, and make sure we’re taking the right decision by having all the information on the table.”

Going further, Mr Myers called on the IMF, if it was so confident that VAT and the Bahamas were a great marriage, to “guarantee to pick up the slack”.

“If they’re so sure of it, and the Government is so sure of it, let’s sign a contract with the IMF that if this thing does not go the way it must go, they will relieve us of our debt,” he added.

“If they’re [the IMF] willing to put some skin in the game, I’m willing to give it a shot. If they’re so sure, let them put skin in the game, guarantee they’ll relieve us of our debt if they’re wrong.”

Mr Myers told Tribune Business that “there’s no price elasticity anywhere” in the Bahamian economy, meaning it would be difficult for anybody to absorb the inflationary effects from 15 per cent VAT.

“Who the hell can take that?” he asked. “The consumer sure can’t, the consumer sure can’t, and the foreign consumer in the shape of tourists is already switching to other jurisdictions.”

Noting that the IMF assessment also appeared to be pinning hopes for Bahamian economic recovery solely on Baha Mar, Mr Myers again questioned whether it and the Government had “seen something we haven’t”.

He queried whether studies had been done on whether Baha Mar would grow or split the high-end visitor market with Atlantis, or whether the Government was “taking a swing at it”.

“We’re hoping Baha Mar fills the rooms, and Atlantis and the other hotels don’t get cannibalised,” Mr Myers told Tribune Business.

“There’s reasonable concern there. We need them [Baha Mar] to be successful. We want Baha Mar to be wildly successful. The Government needs it, the business community needs it, and the people need it. We hope they are right.”