The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s bonded warehouse plan to prevent Value-Added Tax (VAT) ‘double taxation’ has been branded “impossible and not practical” by the private sector, its Tax Coalition co-chair warning: “It’s not going to happen.”

Robert Myers told Tribune Business that the Government was increasingly taking “a very dictatorial position” on key aspects of VAT implementation, and was seemingly uninterested in the private sector’s alternative proposal.

He disclosed that instead of bonded warehouses, the private sector had proposed a certified inventory audit at around the implementation date - currently July 1 - with companies receiving a tax credit on sales of this stock.

This would prevent Bahamian companies being hit by the ‘whammy’ of higher pre-VAT Customs duty rates and the new tax’s 15 per cent levy, ensuring sales post-July 1 only attracted the newer, lower border rates.

The Government has proposed bonded warehouses to achieve the same result, with these operating for three months - two months prior to VAT implementation, and one post. This would allow stick removed post-VAT to attract the lower Duty rates.

However, private sector executives have warned that this solution is not practical for industries such as the auto sector, which are on four-five month ordering cycles, and others who are buying in bulk from markets such as Asia and Latin America.

Importers engaged in this business are on ordering cycles up to six months out, while the Government’s other suggestions to manage the VAT transition - such as companies running their stock down - has been deemed impossible because it will leave them unable to meet customer needs.

“It’s unacceptable. The business community won’t accept it,” Mr Myers told Tribune Business of the bonded warehouse goal. ‘It can’t happen in a business system. There’s no possibly way to do what they want us to do.

“They need to take an inventory at the point of turnover [to VAT], and give us back credit on the inventory in stock, so we’re not double taxed.”

Acknowledging that such inventory audits would have to be signed off on and certified, the Coalition for Responsible Taxation’s co-chair said the Government’s insistence on certain technical aspects of VAT implementation was making his job even harder.

Emphasising that he wanted to build consensus between the Government and private sector, Mr Myers said this was being made impossible because the former was merely “inciting and infuriating” his constituents.

“Bonded warehouses are just not practical. Separate warehouses are not possible, not practical,” he told Tribune Business. “They [the Government] have no understanding of industry or business.

“It’s not up for discussion. It’s a standstill. What are they [the Government] going to do? We’re not going to do it. We’re at a Mexican stand-off.

“If they don’t want to listen, don’t want to negotiate, we’re at a Mexican stand-off. Good luck pushing VAT. It’s [bonded warehouses] not practical and not going to happen,” Mr Myers added.

“They’re going to have to bend in certain areas. I challenge anyone to go into these major warehouses and figure out how they’re going to do that. They’ll just have to bend or break.”

The Tax Coalition co-chair said the Government wanted the private sector to convert its own warehouses into bonded facilities, something all major importers - whether food retailers and wholesalers, hardware and houseware suppliers - had said was not an appropriate solution.

Mr Myers said “the only way we can get the consumer the pricing they want and can afford is to buy in volume”, which was why some Bahamas-based businesses had diversified their supply sources to Latin America, China and the Far East.

As a result, these companies were purchasing in bulk on six month order cycles, a period twice as long as the ‘bonded warehouse’ proposal, and which raised the risk of ‘double taxation’ post VAT.

As for the Government’s suggestion that companies could run their inventory down just prior to VAT’s implementation, Mr Myers responded: “You can’t run inventory down because people will starve, they will have no selection and destroy sales, which are already hurting like hell. Why is it so difficult to do an inventory check at a specific date?”

Asked by Tribune Business about how the Government and Ministry of Finance had responded to the private sector’s alternative proposals, Mr Myers replied: “The same as always: Nothing.

“Their idea of negotiating is: ‘We’ll tell you what to do, and you’ll listen’. That’s their idea of negotiating. They’re not listening. It’s a one-way street.

“If they want to harden their position, we’ll harden our position. Forget the Government: How’s that going to help the country?”

Mr Myers said the Government was unable to understand why bonded warehouses were not a viable solution because it was not a businessman, and did not understand the private sector well enough.

“They’re just infuriating the private sector; these groups that have inventory issues,” he told Tribune Business. “We’re hearing back from them, and they’re just more and more infuriated.

“This makes the process more and more difficult. I’m the consensus guy, and what’s happening is not healthy. The discussions between the Ministry of Finance technocrats and these specific industries have not been productive.

“You can continue to incite and infuriate the private sector, or you can negotiate. This is one of the things that you can’t negotiate on.”