The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians have been urged not to comply with Value-Added Tax (VAT) until “the politicians pay their dues”, and the banks and web shops have been made ‘VAT-able’.

Dr Johnathan Rodgers, the well-known eye doctor, in a column published on Page 2B today, argues that all serving politicians need to fully comply with the Public Disclosures Act before seeking to levy fines and jail terms for VAT non-compliance.

And he hits out at the Christie administration’s decision to make banks (financial services) and a legalised web shop industry VAT ‘exempt’, arguing that this is effectively giving the two wealthiest sectors in the Bahamian economy - including one that is currently illegal - a beneficial tax break.

“I am not entirely surprised that both of these [industries] have been exempted, because not only are they the two largest and most profitable, but are also the two largest political lobbying groups in the Bahamas,” Dr Rodgers writes.

“The commercial banks have always had the Government in their back pocket, and now the numbers lords have them in their front pocket. Thus, when necessary, they can literally squeeze the Government financially from both sides into acting in a manner that is not always in the public interest.”

Many observers, though, believe that it is generally preferable for businesses to be ‘VAT-able’ rather than ‘exempt’ - which is how financial services’ loan and savings product, plus all forms of gaming, will be treated.

‘Exempt’ status under VAT effectively shifts the tax burden from the end-consumer to the business, as the latter is unable to reclaim or ‘net off’ the VAT paid on its input costs. Consumer prices, though, will go up, though perhaps not by as much as the 7.5 per cent VAT rate, as these businesses attempt to recover their greater tax burden.

Detailing what he perceives as the Government’s hypocrisy over the web shop issue, Dr Rodgers said not only had the Christie administration ignored the ‘No’ vote from January 2013’s opinion poll, but it had accepted numbers industry money to help finance a study on the sector’s legalisation.

And, while the Bahamian commercial banks were refusing to accept deposits even from a legalised web shop industry, ostensibly to protect their US correspondent banking relationships, Dr Rodgers said they were also concerned that the numbers industry was now ‘out lending’ them.

“It seems to me that Government has spent an inordinate amount of time, money (public funding) and effort, and lost a tremendous amount of integrity, in its attempt to regularise an illegal industry, when this country has a myriad of other far more pressing and important issues that need to be addressed,” Dr Rodgers writes.

“Now that the Government has been forced to introduce VAT because of the total mismanagement of the Bahamian economy, both by itself and past governments, it is exempting the very entities who could, should and can afford to pay their fair share of taxes.”

Arguing that this would not be allowed in any developed country, Dr Rodgers added: “The new VAT legislation gives the Government the right to fine and jail persons who are VAT non-compliant.

“Before any VAT delinquent is subjected to any of these penalties, all of the delinquent politicians who have failed to file their disclosures should be made to pay the associated outstanding fines and/or serve the jail time as outlined in the Disclosures Act.

“No man or woman is above the law, and that includes those who we have elected to look after our best interests as opposed to only the interests of special interest groups,” he added.

“I would urge all Bahamians to stand up and refuse to accept and comply with VAT until the numbers industry and the banks become ‘VAT-able’ and the politicians pay their dues. VAT a mess.”