The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Tax Coalition’s newly-hired economists will start work this week, with one of its co-chairs yesterday suggesting it would be impossible for the Government to implement Value-Added Tax (VAT) in the face of widespread private sector opposition.

Robert Myers, speaking in the wake of the Coalition for Responsible Taxation’s decision to hire Oxford Economics to conduct dynamic economic modelling of all potential tax reform options, said rushing VAT into existence on July 1 would only “backfire” on all stakeholders.

And he agreed with Tribune Business’s suggestion that, with just over four months to go, it was virtually impossible from a practical perspective for the country - both private sector and the Government - to implement VAT by July 1.

Referring to the Family Islands specifically, Mr Myers said many groups there did not know “what the hell this is about”, while small businesses that exceeded the VAT registration threshold needed financial and technical assistance to meet their compliance obligations.

The Tax Coalition co-chair, though, did indicate that VAT at a lower rate than 15 per cent would be more palatable to businesses and consumers - something also suggested by Ryan Pinder, minister of financial services, in his Mid-Year Budget presentation.

Oxford Economics, according to a schedule seen by Tribune Business, is due to present its final report in the week beginning May 5, 2014.

The consultancy firm is currently engaged in a review of all available VAT documents and literature, and will next week begin consultation with both the private and public sectors - something scheduled to last two weeks.

Simultaneously, Oxford Economics will also start comparative VAT research and its dynamic economic modelling processes, in a bid to forecast the impact this tax - and other reform options - will have on key Bahamian economic indicators, such as growth and employment, going forward.

The preliminary results and key findings from their work will be presented between the seventh-ninth weeks of its contract, with a draft report presented in the week beginning April 28. Oxford Economics’ final report will then be presented the following week.

Mr Myers, in an e-mail issued on Friday, February 21, confirmed: “The BCCEC Coalition for responsible taxation has retained the services of Oxford Economics to conduct dynamic economic modelling that will evaluate the effects VAT and a number of other alternative taxes will have on the economy and, in particular,r our levels of industry competitiveness locally and regionally.

“It is hoped that the modelling and reports derived from this research will allow the Coalition to make recommendations to the Government on means of additional government revenue while maintaining positive economic growth.”

Oxford Economics is well-known to the Government, having performed economic impact analyses for numerous major investment projects in this nation, including Baha Mar’s $2.6 billion Cable Beach expansion.

Mr Myers said the Coalition’s choice met “no objection” from the Government when it submitted the names of candidates to it.

He added: “In an effort to remain collaborative with the Government, we also provided a copy of the RFP that went out to the economist. As has been publicised, the Government has agreed to support our study and we have, in fact, already moved the schedule forward by a few days.”

Speaking to Tribune Business from abroad, Mr Myers said the study, which will examine both VAT in its proposed and modified forms, and other options such as a payroll tax, would focus heavily on the effects for industries such as tourism, construction, the wholesale/retail sector and services in general.

The Oxford Economics study will be completed less than two months before the July 1 VAT implementation target and, when asked whether there would be enough time for its results to influence government thinking, Mr Myers replied: “I have to say yes, given when the Prime Minister has said.

“We’re going to do it anyway. Even if they pass it [VAT legislation] but don’t enact it, I can’t imagine they’d want the business community against it. It doesn’t make any sense to do it with the business community against it.

“I don’t see any upside in rushing it, that’s for sure. That’s just going to backfire.”

Mr Myers said his “sense” was that while the Government would like to implement VAT by July 1, they would instead wait, given the opposition and angst it was causing.

He added, though, that the Bahamian private sector might be more accepting of VAT if it was introduced at a lower rate than the proposed 15 per cent.

“Clearly, at least from my opinion, nobody’s loving VAT at 15 per cent as proposed,” Mr Myers told Tribune Business.

“If they went with VAT, a lot has to be done to get it to the point where the business community is accepting of it, and that’s in the implementation, the ongoing administration and amount it would be.”

The Tax Coalition co-chair said Oxford Economics was “good to go” with its economic modelling, with the study timetable having moved forward three to four days.

“It’s important for the country to do the right thing, and hopefully the leadership will appreciate that,” Mr Myers added. “I get the sense they do.

“There’s a lot of noise in the market, but I feel they’re [the Government] anxious to see the results and work things through with us.

‘It’s frustrating for us at times when certain ministers and civil servants say certain things, but hopefully they’ll do the right thing in the end.”

The clock also appears to be moving against the Government’s VAT implementation deadline, with just over four months left to July 1 and much left to be done - both inside government and the private sector - in terms of education and preparation.

The VAT legislation and regulations remain in draft form, and have yet to be signed off on by Cabinet, let alone passed by Parliament, while not even a draft Tariff Schedule has been released for public consultation.

Mr Myers yesterday agreed that July 1 seemed an impossible target from a practical viewpoint, adding: “The problem is, from what I can tell, that they [the Government] haven’t reached various Out Island groups.

“There’s a lot of country left that still does not know what the hell this is about. And there’s a tonne of small businesses in that [$100,000] threshold that do not have the capacity to do this.

“They have no understanding of this, and no capacity to do this. All these little guys, if the Government doesn’t help them get sorted, they’re not going to get sorted out themselves.”

Mr Myers estimated that just 20 per cent of the Government’s forecast 4,000 mandatory VAT registrants were large companies, with their small brethren needing software, IT and Point of Sales help.

He added that the Government, too, was beginning to recognise this issue.