The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BAHAMIAN merchants are “stretched like never before” in having to prepare for both the Christmas shopping season and Value-Added Tax (VAT) implementation, the Bahamas Federation of Retailers’ (BFR) co-chair describing January 1 as “literally the worst date on the calendar” to introduce tax reform.

“The Government of the Bahamas could not have picked a worse date to implement VAT if they had deliberately tried and we, the Bahamas Federation of Retailers, told them that from the very beginning, when they first announced the date,” said Etienne Christen.

“We, as retailers, are all stretched very thin as a result of having to both prepare for Christmas and prepare for VAT, stretched like never before, and the economy is still slow, so that has made it even harder.”

Mr Christen added: “On the issue of the implementation date, the Government ignored the private sector completely. January 1 is quite literally the worst date on the calendar to have implemented a new tax.

“Businesses need Christmas sales to survive, and making businesses focus on VAT implementation while they should be focused on their customers and Christmas sales proved definitively that the Bahamian government simply does not understand the reality and complexity of doing business in the Bahamas and, in their communications with us, didn’t seem to care very much about that fact, which is the really sad part.

“As a young business owner, this experience has taught me a lot about our government’s attitude towards businesses - businesses that pay taxes and create employment, and are now being asked to be the Government’s tax collectors to boot. Needless to say, we weren’t very impressed. Our success or failure determines the success or failure of the tax, and this reality seems completely lost on the Government.”

Mr Christen said the retail sector had repeatedly warned the Christie administration that VAT preparation in December would be a “massive distraction”, and would ultimately cost the Government thousands of dollars in lost revenue as it would impact how much inventory businesses imported for the Holiday Season.

“The Government ignored us. We can only hope that everything works out for the best at this point, but confidence in government, which was low to start, has been deeply shaken and eroded by this experience,” he said.

“Instead of working with businesses, the Government worked over and above them. Despite all the platitudes in the paper about working closely with the business community, ultimately, the Government has not listened to us more than they have listened to us.”

Mr Christen said the Federation was still hoping for an “11th hour deferment” of the VAT implementation date to February 1. “This would be a massive lift to everyone and would substantially boost confidence, Christmas sales and thus, the overall economy,” he argued.

“At this point, we can only hope that the Government embraces exclusive pricing so that the implementation and transition to a VAT system are as fluid and seamless as possible. If they listen, it would be a most pleasant surprise. Given that it is the Holiday Season and the time of miracles, we are still hopeful that they will see the light.”

Michael Halkitis, minister of state for finance, earlier this week said he was very confident in the Government’s readiness to implement VAT on January 1.

He added that he planned to make a formal presentation in the House of Assembly next week on VAT preparation and readiness, as well as give an update on Customs and real property tax modernisation and expenditure control, before Parliament breaks for the holidays. According to Mr Halkitis ,nearly 5,000 business have registered for VAT.

The Federation, though, has warned that the Government’s insistence on VAT inclusive pricing imposes “a massive administrative cost on businesses, as everything in the country will need to be re-priced, re-ticketed, reprinted or relabeled”.

“VAT inclusive pricing will necessitate the re-pricing, relabeling or retagging of millions of items across all of the retail stores and other businesses in the Bahamas. From car brochures to menus, from posted service charges at the dentist’s office to clothing, shoes, electronics and car parts, every item or service currently being sold or traded in the Bahamas will have to be re-priced come January 1, as the law is currently written,” it has warned.

It also warned that thousands of extra labour hours would be required, with companies having to call in employees during the holiday season to transition to VAT inclusive pricing.

“Essentially, this approach would ensure that the administrative costs of VAT compliance will be incredibly and unnecessarily high,” the Federation said previously

“Many Bahamian businesses don’t have POS systems, so they will have to manually re-price everything.

“Yes, the Government has given an extension for re-pricing, but that will cause confusion for customers as, depending on which store they are in, they won’t know if that particular store has ‘inclusive’ pricing already in place or if VAT will be added at the register.

“With any tax reform, high administrative costs associated with compliance translate into a lack of compliance, thus reducing the effectiveness of the tax’s implementation and collection.”