The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax’s (VAT) implementation “won’t be smooth” if the Government insists on its July 1 start, a Tax Coalition co-chair yesterday urging it be pushed back to a target date that will cause “the least amount of pain”.

Gowon Bowe, the PricewaterhouseCoopers (PwC) Bahamas accountant and partner, said the private sector wanted to get tax and fiscal reform “right”, not “set a precedent” as the Caribbean nation that implemented VAT in the shortest possible timeframe following passage of the relevant legislation.

Emphasising that the Coalition for Responsible Taxation did not want to make fiscal reform “go away”, Mr Bowe called on the Government to delay VAT - or any alternative tax system - for at least several months beyond July 1 to ensure both private and public sectors were ready.

“July 1 definitely won’t be smooth,” the Coalition co-chair told Tribune Business.

“If it is forced in that manner, it will be a very brow beating exercise. It will be a sort of ‘by hook or crook, we’ll get it done’, but if you want persons to understand it, have confidence in how it works, then move it back by a few months at a minimum.”

Mr Bowe did not specify how far back the Coalition wanted to push back tax reform implementation, although it previously urged the Government to delay until 12 months after the draft legislation’s release.

According to that schedule, the Coalition wants VAT’s implementation pushed back until at least November 2014 - four months beyond the Christie administration’s preferred target.

“As each day passes, people are more and more of the view that there has to be some movement in the timeline,” Mr Bowe said. “In your [Tribune Business] discussions, that has been a constant theme.

“We’re not saying make that date go away, but move to one where we can implement with the least amount of pain.

“The public are saying we’ve been hearing about the VAT legislation from May, June last year, but its release was moved to late November,” he added.

“If it slipped six months, doesn’t that mean there’s a knock-on effect for timelines in implementation and education. We can’t be all things to all people; we have to be methodical, and move through it.”

The PwC partner pointed out that the Ministry of Finance, and its Central Revenue Agency/VAT Unit had yet to complete the installation of their own VAT-related software and computer systems.

As a result, with less than five-and-a-half months to go before VAT’s implementation, the Bahamian private sector has had no opportunity to test any of its systems/software when it comes to interfacing with the Ministry it will have to submit tax collection and remittance reports to.

Mr Bowe said practical steps, not just policy decisions, were required for VAT’s successful implementation.

When it came to the systems integration aspect, and the potential for a break down, he added: “We have to look no further than Obamacare in the US. We need to be mindful of that, and make sure the interface is there.

“From a personal perspective, I was under the impression that Customs was all electronic filing now. I can tell you, to my chagrin, that it’s still manual. VAT, manually, is not going to work. IT is a significant element that must be got right.”

Mr Bowe called on the Government to set a more realistic tax reform implementation deadline, whether it was VAT or an alternative, set clear timelines and achievable goals at each step of the process, and stick to them.

Urging it to adopt private sector practices in that regard, the Tax Coalition co-chair reiterated the private sector group’s position that the existing VAT deadline was “very aggressive”.

“If we put it into context, coming from a system of no taxes to a system of new taxes, do we want to be setting precedents? We want to get it right,” Mr Bowe told Tribune Business.

“We’re asking for it to be delayed, not for the sake of delaying, but if anything happens for it to be done prudently and in the right way.

“If we step back and don’t miss the forest for the trees, this is not change in Business Licence fees, this is not a change in the tax system.

“Right now, we are fighting against the unknown. While there are various elements out there, the only advice we have is more haste, less speed.”

Mr Bowe told Tribune Business the Coalition had been advised by economists that it would take a minimum eight weeks, or two months, to conduct a dynamic model of VAT’s likely social/economic impact on the Bahamas.

He explained that it the Coalition wanted to develop a forecasting model, rather than use the Inter-American Development Bank (IDB) study on VAT’s Bahamian impact, as this was a historical model that looked at the ‘what if’ effects the tax would have had on this nation between 2000 and 2011.

With the Coalition already “pressing” the Government to obtain data vital to any study, Mr Bowe said: “It’s not a back of the envelope rush. We want to put forward proper proposals, well thought-out and backed by empirical evidence.”

He added, though, that the Government should “not overlook” its main achievement to-date, having convinced the majority of Bahamians that fiscal consolidation and tax reform was necessary.