The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Bahamian retailers yesterday urged the Govern to “reinvest” itself in the Value-Added Tax (VAT) consultative process, calling the tax’s problematic implementation elsewhere in the Caribbean “absolutely relevant” to this nation.

The Bahamas Federation of Retailers, in a statement responding to recently-published comments by Michael Halkitis , minister of state for finance, who suggested “slow public feedback” to the Government’s White Paper was partly responsible for the delay in VAT legislation, said discussions with the private sector seemewd to have stalled after starting positively.

The Federation which purports to represent over 100 retailers, blasted that such remarks were “disingenuous”, as the industry had yet to receive the draft regulations that deal with the “nuts and bolts” of VAT.

“Through the Coalition for Responsible Taxation, we have been seeking to have an ongoing dialogue with the Government about VAT and tax reform in general,” it said.

“The discussions started on a positive note, but have somewhat stalled over the past couple of months. This is unfortunate and we sincerely hope that the Government reinvests itself in the consultative process.

“The IMF and the rating agencies have made clear that ‘buy in’ from the private sector is crucial for any successful tax reform. The rating agencies have already described the Government’s implementation schedule and high introductory rate as ‘aggressive’, and advised that consultations should have begun sooner for such a major tax reform,” the Federation added.

“The reality is that the private sector and the wider public have been asking for the draft legislation and the draft regulations for months. The Coalition for Responsible Taxation finally received the draft legislation in late November, but were told that it wasn’t finalised and would be subject to further review.

“Despite numerous requests, to date, we have yet to receive the draft regulations that actually deal with the nuts and bolts of the VAT legislation. It is the regulations that provide the details of any duty reductions being proposed, and the details of how the actual VAT would work in practice. It is also the regulations that spell out what happens to existing inventory for which the old, higher rates of duty have already been paid when the new VAT comes into place.”

Raising widespread private sector concerns over the transition from the old tax regime to VAT, the Retailers Federation warned: “The spectre of being ‘double taxed’ on existing inventory is very real and very serious, and would lead to a dramatic increase in prices in the domestic economy in the short-term.

“The legislation just lays out the legal framework, but the details of the tax are in the draft regulations. Thus, businesses in the private sector and the wider public at large cannot properly assess the impact of the proposed VAT legislation without having the draft VAT regulations in hand.

“As stated, these have not been released, so for the minister of dtate for finance to be talking about ‘slow public feedback’ is disingenuous. How can anyone in the country give feedback or comment intelligently on something we haven’t seen to date? If the Minister would like to release the regulations, which have been promised for months, then we assure him that he will get lots and lots of feedback from the private sector and the public at large. We kindly ask, again, that the Minister release this information to the public so that serious thought and consultation can occur.”

The Federation has also taken issue with Mr Halkitis’s assertion that Bahamians should not be concerned over VAT’s impact on other countries in the region.

“His statement is inexplicable, as why wouldn’t Bahamians compare our situation to those countries who are most similar to us culturally, economically and historically?,” the Retailers Federation asked.

“Any thinking person would compare and contrast similar circumstances so as to understand how those things may affect themselves. The experiences of Barbados, St Kitts & Nevis, St. Lucia or even Jamaica are absolutely relevant when trying to assess the possible impact of VAT.

“VAT did not have the desired effect in any of those countries. All of these countries are tourism-based and services-oriented, just like the Bahamas,” the Federation added.

“If we are going to try and understand the impact of VAT on a country, where else should we look to but our neighbours who have already tried to implement it? As a country, as an economy and as a peopl,e are we more similar to Barbados and Jamaica, or to the UK and Canada?”