The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s meeting with the Retail Grocers Association over Value-Added Tax (VAT) was yesterday likened to “two deaf people trying to have a conversation without the assistance of a lip reader and signer”.

Prominent businessman Ethric Bowe, who attended last week’s meeting, said neither side appeared to hear the other’s viewpoint, and held opposing positions over whether VAT was the best tax reform option for the Bahamas.

Mr Bowe, who sided with the Association, told Tribune Business that the Government had yet to convince both it and the wider business community why fiscal reform “should have VAT stamped on it”.

Noting that the private sector was “strongly opposed” to VAT implementation, he added that the two sides were at different stages in the process - businesses having yet to accept the proposed tax as a concept, while the Ministry of Finance was pushing workshops to educate them on how it would work.

And Mr Bowe warned that if consumers and businesses refused to accept VAT, the Government would create more fiscal problems for itself if it tried to “force it” on the Bahamas, as massive avoidance/evasion would result “from day one”.

Tribune Business understands that among the alternatives being developed by the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) Coalition for Responsible Taxation is a 5 per cent payroll tax, which could be administered through the National Insurance Board (NIB).

This would seemingly be easier to administer, and have lower associated costs, given that the necessary infrastructure is already in place via NIB.

Fred Albury, the Bahamas Motor Dealers Association (BMDA) president, outlined some of the details to Tribune Business last week, and the theme was echoed by Mr Bowe yesterday.

He also warned that the Bahamas was in danger of creating a ‘welfare society’, and of making the middle class and lower income segments of society, poorer as a result of VAT.

Evidence to support these concerns, Mr Bowe said, came from the numerous social programmes the Government was promising to cushion VAT’s impact.

“It was like two deaf people trying to have a conversation without the assistance of a lip reader and signer,” Mr Bowe told Tribune Business of the Retail Grocers Association’s meeting last week.

“It was two groups talking to each other, both deaf, talking, talking, and not hearing the other side.”

Explaining his summation, he added: “For some reason, they seem committed to VAT, the Government.

“The business community is committed to resolving the debt problem and getting the country’s fiscal house in order, but the business community is strongly opposed to VAT.”

Reiterating that “nobody is opposed to doing what is necessary to deal with the fiscal crisis”, Mr Bowe said the private sector had “problems with waste of money and fiscal accountability” in government.

Describing this as an “ongoing issue”, which needed to be part of comprehensive fiscal reform, he told Tribune Business: “We need to fix the leaks in the boat first.

“We need to be fiscally responsible, cut out the waste, slack jobs for the boys, slack contracts. If we do that, we may not need any other kind of taxes. That’s the message: Put your house in order.

“We’re not opposed to setting the fiscal situation in the country right, we’re all in this together, but we have not been made to understand why that solution should have VAT stamped on it. “

Mr Bowe again urged the Government to legalise, regulate and tax the web shop gaming sector, arguing that this could generate between $50-$150 million in extra revenues per annum alone.

“Culturally, it’s part of us,” he said of web shop gaming. “It’s here to stay, and we need to tax it. They want to be taxed. I say: ‘Tax the people who want to be taxed first’.

“You want to deal with taxes that are easy to collect, and we have a framework at NIB to deal with payroll taxes.”

Mr Bowe described VAT’s likely inflationary impact, which the Government has pegged at 5-6 per cent, but others have placed at 10 per cent and 18-20 per cent, as “a big concern”.

Noting that this would result in reduced purchasing power and living standards, he added: “The Government is preparing to have more social programmes.

“When you do that, you are transferring wealth from one group to another. It’s better for people to have jobs than welfare. We don’t like welfare; it’s not good for the country.

“I prefer workfare to welfare. We have to grow the economy, that’s what we think.”

Mr Bowe warned that if the general price level increased, consumers would “start bypassing the system” and desert VAT-registered businesses in favour of either those that did not have to pay it or the informal, underground economy.

This, he added, would “create disincentives for people to be successful” and grow their businesses, employing more Bahamians via increased investment.

While the Retail Grocers Association had agreed to meet again with the Government, Mr Bowe said the latter wanted to focus on VAT’s implementation when the business community had “not accepted the concept”.

“There are some clever people,” he added. “Nobody wants to go to a VAT workshop, as they do not want VAT, but they want a VAT workshop to show how to do it.

“I know business people are not going to do it; they’re just going to stop their businesses. There’ll be job losses and the economy will get choked with VAT. There is uncertainty, and the longer there is uncertainty, the worse it will be for the economy.”

On the bright side, Mr Bowe said the tax reform debate had given the Bahamas an “opportunity to grow the economy and make it more sophisticated”.

Bahamians, he explained, were behaving more like voters in places like Florida and California, who had to approve and vote on major tax reforms.

“It’s better for people to accept the tax than it be forced on them, as from day one they will seek to avoid it,” he told Tribune Business. “That’s simply increasing the Misery Index.”