The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Government’s “administrative readiness” for the proposed July 1 Value-Added Tax (VAT) implementation remains a “huge concern”, a Tax Coalition co-chair yesterday asking: “How are we to be ready if you are not ready on the other side?”

Gowon Bowe, co-chair of the Coalition for Responsible Taxation, while speaking at a Bahamas Society of Engineers (BSE) luncheon, questioned how the Government itself could be ready to administer VAT given that implementation was a mere five months away.

“We are now going into February and we are still talking about July 1, 2014,” said Mr Bowe. “The Government’s system is not ready. This is not a plea to say delay for the sake of delaying, this is one to say how are we to be ready if you are not ready on the other side. We want to see some plan to show us how they are going to get from A to B.”

The Coalition, which purports to represent some 700 local businesses with a “conservative” estimate of 65,000 employees, is still talking to the Government on tax and overall fiscal reform i. 
“We are also promoting dialogue about fiscal reform. If you leave the discussion at tax reform, then it becomes a discussion as to what is the appropriate form of taxation,” said Mr Bowe.

“The Coalition has launched a petition to demand the facts, demand a delay as well as alternatives to Value-Added Tax. The Coalition has never said that it is ‘no’ to VAT. Up to this point VAT has just appeared.

“There has been much dialogue with the community to say: ‘This is the thought process, this is what we have analysed and we have come to the conclusion that VAT is the best alternative’. We as a Coalition are trying to force that.

“If you have made such a major decision to reform our tax system in such a seismic manner, we want to be comfortable that this is not a fly-by-night decision. That this is a well thought-out, well reasoned and empirically supported decision. Up to this point that’s been the main component that’s been lacking in a lot of the discussions.”

The Coalition last October forwarded a letter to Prime Minister Perry Christie highlighting concerns such as VAT’s anticipated inflationary impact, the proposed timeline for implementation, the frequency of filing requirements and the handling of pre-VAT purchased inventory.

Mr Bowe noted that a “tremendous strain” could be placed on business cash flows under the system being proposed. “We could have invoices raised today that don’t get paid for three months or at all,” he added.

“VAT is due and payable at the time you raise the invoice. What are the provisions that are going to enable that? It’s been said that you will get credit for it, but how quickly will those credits be applied?

“This is going to put a tremendous strain on the cash flow of businesses if you have to pay VAT before you can claim it back. They have made it clear that if revenue that you have reported is not collected, you will get credit for it, but am I out of business by the time that I get my credit. Cash is king. I can’t go to my supplier and say I have a VAT credit, would you take this instead of cash. That’s a very real issue for businesses.”

Mr Bowe said tax reform would not come without pain. “You’re taking an undisciplined society as it relates to taxation and trying to force it into a disciplined society in a very short period of time, and that could have negative consequences,” he added.

“We have to make sure we do it in a manner that allows us to get there with the least amount of pain. There will be pain. We will all have to pay, but we want to make sure that we’re all paying; not just the private sector or the consumer, and not holding the Government accountable.”

Mr Bowe said the Coalition has generated significant feedback from the business community on VAT since the Government announced its plans.

“We don’t want it to be something that is rammed down our throats,” said Mr Bowe. He added that VAT would not only affect businesses but consumers in general.

“VAT doesn’t hit just businesses alone. This is really a taxation on your income because it will increase the cost of goods and services, and reduce your disposable income and potentially limit your purchasing power,” he added.

“Business is not going to carry 15 per cent, not directly; it’s the consumer. Business is going to be impacted because the consumer is going to be impacted. If the consumer has less to spend, businesses have less revenue to generate. Businesses will then have to cut costs, and employees are the easiest cost to cut.”