The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian non-profit organisations were yesterday urged to “fight” the Government’s plans to treat them as ‘exempt’ for Value-Added Tax (VAT) purposes, the president of one warning they would all be “crippled” if not ‘zero rated’.

Kim Aranha, the Bahamas Humane Society’s president, told Tribune Business that non-profit organisations and charities needed to “band together” to fight plans to hand them ‘exempt status’ under VAT, as this would result in increased costs.

Ms Aranha, in questioning John Rolle, the Ministry of Finance’s financial secretary, on how the Government planned to treat non-profit organisations, warned that if the Humane Society had to levy 15 per cent on ‘consumers’ she would “give the potcakes their freedom now”.

Addressing Mr Rolle at the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) luncheon, she said that if charities had to pay VAT: “I may as well go down there now, lock it up, let the cats go and give the potcakes their freedom and go home.

“If you throw this on top of us, too, you’re going to destroy many charitable organisations.”

Ms Aranha was visibly reassured when Mr Rolle said non-profit organisations were “usually in the exempt category” for VAT purposes, meaning they did not have to levy 15 per cent on ‘consumer bills’.

However, Ms Aranha yesterday told Tribune Business that her cousin, Callenders & Co attorney and partner, Carey Leonard, had since explained to her the negative consequences of being rated ‘exempt’ under VAT.

While Bahamian non-profit organisations and charities will not have to charge VAT to so-called ‘end users’, they will still have to pay VAT on their input costs, and are unable to receive refunds of these sums.

Following advice from Mr Leonard that ‘zero rating’ - where entities levy no VAT on consumers and receive refunds of tax paid on their inputs - would be best for the non-profit sector, Ms Aranha said the Bahamas Humane Society would now have to lobby the Government for that designation.

“If he [Mr Rolle] is right that we are exempt and not zero rated, all the non-profits will have to band together and apply to be zero rated,” she told Tribune Business.

“I told Carey we’re exempt and he said: ‘No, be zero rated’. We have to look into this properly, see if we’re exempt, and if not, fight to be zero-rated. I need to get all my fellow non-profits together and fight this right away.”

Ms Aranha said that being VAT ‘exempt’ would expose the Bahamas Humane Society to paying a 15 per cent levy on purchases such as dog and cat food; leashes; collars; and medicines.

“And we would not be able to apply to get that money back,” she added. “We need to find out.”

The Government’s VAT ‘White Paper’ has attempted to keep the number of ‘exemptions’ and zero ratings as low as possible, with only export industries and suppliers of services for air/sea transportation outside the Bahamas likely to receive the latter status.

Pointing to non-profit organisations such as the Bahamas Red Cross, Bahamas Olympic Committee, Bahamas Association for the Physically Disabled, Ranfurly Homes and the Cancer Society, Ms Aranha told Tribune Business: “There are so many organisations here that could be crippled if we are not zero rated.

“I intend to try and clarify that, but the likelihood of him [Mr Rolle] using the wrong word is pretty negligible. We have to move fast to lobby on this, but the legislation will come out very fast and then be passed into law.

“If we have to pay VAT on everything we purchase, you will end up crippling us, because everything is more expensive here. We have to be zero rated.”

Ms Aranha warned that if the Government’s VAT plans forced non-profit organisations and charities to cease operations, the state would be forced to itself fill the vacuum and “take the burden of responsibility yourself”.

This, she added, could leave the Government with the extra expense of having to deal with the animal issues currently handled by the Bahamas Humane Society, and also provide services such as the Bahamas Red Cross’s ‘Meals on Wheels’.

However, Ms Aranha expressed relief that the Bahamas Humane Society and others would not have to levy VAT on ‘consumer’ bills, due to the cash flow management problems it would have created.

Like many companies in the private sector, Ms Aranha said the Bahamas Humane Society frequently found itself carrying large accounts receivables from non-paying customers, and having to write much of those off.

Noting that the Bahamian companies would become liable to pay VAT to the Government as soon as the bill or invoice is sent out, Ms Aranha said the Bahamas Humane Society, too, had feared having to carry/pay VAT on sales revenues it did not receive.

“Someone comes in with a dog needing $200 worth of treatment, and it takes them a year to pay us back,” she said of the payment situation typically facing the Society.

“We have a huge amount of stuff written-off, and a large amount of people coming in, paying $5 a week, $10 a week. So if I’ve got a $100 bill, I will have to pay the VAT on that for them.”

Ms Aranha also expressed concern over whether the Government would provide VAT input refunds within the 60-day target, and whether some companies would simply levy the 15 per cent tax on consumers and “pocket it” themselves.

Suggesting that the new tax would raise prices and create a “double whammy”, with consumers - who have less disposable income - electing not to bring their pets in for treatment, Ms Aranha told Tribune Business: “I find the whole thing too quick.

“It’s all being pushed through too fast. We can’t we see the legislation? They’ve had the legislation since March. Why can’t we see it?”