The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) would “likely be a fait accompli” without the private sector’s efforts through the Coalition for Responsible Taxation, its co-chair told Tribune Business.

Emphasising that the business community was not necessarily saying ‘No’ to VAT, Robert Myers said he would “say less” publicly if the Government stopped “pushing as hard as they are” to ensure it was implemented by July 1, 2014.

With the Coalition now representing 20 industry associations, encompassing more than 800 businesses and 60,000 employees, Mr Myers said the Government’s approach to tax reform had united the private sector to a degree he had never seen before “in my career”.

“It’s showing a lot. It’s quite telling,” Mr Myers said of the Coalition’s membership. “We’ve got a lot of people working in unity. It’s a big deal, showing a lot of unity in the business community. I think that’s just going to continue to grow, especially if people realize we have dialogue at the table with the Ministry of Finance that’s meaningful.

“We’re not saying ‘No’; we’re about saying let’s have consultation. People have been very complimentary of the fact we have taken the initiative to do it, and are driving the dialogue and requesting the dialogue, otherwise it would likely be a fait accompli.”

Asked whether the Coalition’s campaign could persuade the Christie administration that there were better alternatives to VAT, or at least to delay its implementation, Mr Myers replied: “I think there’s a good chance.

“You just cannot give up on dialogue and communication. No matter what, we have to keep it up. I said to Chester [Cooper, Bahamas Chamber of Commerce and Employers Confederation chairman] today, I’d prefer both sides calm their comments, but it’s difficult to do that when they’re driving a PR campaign like they’re doing.

“If they weren’t, I’d be saying a lot less, but while we’re trying to do this they are pushing as hard as they can to get it done.”

The Government has begun to intensify its VAT education campaign in recent weeks via a series of Town Meetings, with Ministry of Finance officials pushing the new tax – the centerpiece of the Christie administration’s fiscal reform plans – as if it is a ‘done deal’ for July 1, 2014.

Ishmael Lightbourne, the head of the Ministry of Finance’s VAT implementation unit, showed why it is so hard for the private sector to maintain a dignified silence. At a Thursday night town meeting, he singled out Super Value owner, Rupert Roberts, for leading efforts to “destabilize” the Government’s tax reform plans.

And he also criticized the private sector in general, branding the business community as “ignorant” for seemingly – in Mr Lightbourne’s eyes at least – ignoring the need to turnaround the Bahamas’ fiscal position.

The gulf between the Government and private sector positions was highlighted further last week by how the two sides interpreted Barbados’s latest sovereign credit rating downgrade by Standard & Poor’s - the second in four months.

Elcott Coleby, deputy director at Bahamas Information Services, used it to justify the Government’s fiscal consolidation plan.

He said: “This is where the Bahamas could be headed if it fails to act sooner rather than later.

“So far, the Bahamas government has successfully staved off another downgrade in 12 months, thanks its fiscal consolidation plan. Barbados was not so lucky.”

Yet Mr Myers, responding to Mr Coleby’s commentary, said it also showed that VAT, together with income and corporate taxes, plus customs duties, still had not generated enough revenue to cure Barbados’s woes.

“Clearly Barbados is having trouble with VAT and its austerity measures,” he added in an e-mailed reply

Mr Myers, though, told Tribune Business: “I’d emphasise that we’re not saying ‘No’ to VAT. Let’s look at the impact, the implications and talk about alternatives that might be less impactful to the economy.”

The Coalition, he added, had already started examining the alternatives, such as a sales tax, income tax or payroll tax, assessing which of these might be “acceptable to the business community”.

Mr Myers said the Coalition was aiming to conduct a proper study/analysis of all the Bahamas’ available tax reform options, along with the likely revenue they would generate and their impact on the wider economy.

“We don’t want to do to the Government what they’ve done to us; throw things out there without validation,” he added, referring to the Christie administration’s failure to release the VAT ‘economic modelling’ and impact studies by the likes of the Inter-American Development Bank (IDB).

“We want to see if they have merit. Either we have to pay to develop them ourselves, or the Ministry of Finance will co-operate with us. We hope the latter, sharing the economic modelling. It’s all about getting all that information and rolling up our sleeves.”

Mr Myers and the Coalition are not the only ones looking to do their own VAT and tax reform studies. Barry Malcolm, the Grand Bahama Chamber of Commerce’s president, confirmed to Tribune Business that it was also set to “prepare a paper” on the new tax and its implications for Freeport.

“The Chamber is studying it,” Mr Malcolm said. “There are obvious concerns as to the implications for economic growth in Freeport, We understand there is a need for additional government revenue, but are looking at various means by which it can be done.

“We will have something to say in due course. We are considering all the information on VAT that is currently available, and hopefully the Government will publish more shortly.”

The latest draft VAT legislation and regulations, published in October, state that the new tax will not conflict with, or attempt to override, the Hawksbill Creek Agreement and Freeport’s ‘bonded goods regime’.

A transaction will not be subject to VAT if it involves the sale of a good/service by one Grand Bahama Port Authority (GBPA) licensee to another for use in the latter’s own business, just as in the existing ‘bonded goods’ regime.

But they will attract VAT in Freeport if the transaction is the sale of a good/service to a non-GBPA licensee, or if it is not for use in their own business.

However, Tribune Business sources have suggested VAT may give Customs and the Government something they have long been seeking – a monthly report on licensees’ ‘bonded goods’ sales.

GBPA licensees currently only have to submit a monthly report on post-paid duty sales, along with the correct duty amount, to Customs by the 15th of the following month. Yet VAT’s demands for an audit/paper trail will likely require them to now submit information on all sales – post-paid and bonded – for the Ministry of Finance to check it is receiving the correct amount of tax.