The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Exempting electricity bills from Value-Added Tax (VAT) would have “benefited the rich more than the poor” and further stressed a Corporation that is “completely bankrupt”, a well-known businessman said yesterday.

Dionisio D’Aguilar, Superwash’s president, said most of the complaints over imposing 7.5 per cent VAT on Bahamas Electricity Corporation (BEC) bills were “political” in nature, and he suggested the Christie administration had got its policy right.

Arguing that the Government could provide other forms of assistance to poor Bahamians than reducing the VAT rate on power bills, Mr D’Aguilar said treating them as ‘exempt’ would have created other problems.

“You get back to the same problem you previously had with food,” he told Tribune Business. “If you had exemptions on all those food items, it would have benefited the rich more than the poor.

“You have the same problem with electricity. If you reduce the VAT rate for electricity, the rich consume more than the poor. If you want to provide relief for the poor on electricity, there are other ways to do it than reducing the rate.”

In other words, making BEC bills VAT ‘exempt’ could have amounted to a major ‘tax break’ for wealthier Bahamians and residents, given that they consume more power than their poorer counterparts.

The Government had previously contemplated setting an electricity consumption threshold below which VAT would not be levied, and also imposing a lower rate than the standard one.

Both these ideas now appear to have been scrapped, and in truth, the Government probably had little choice but to make BEC bills ‘VAT-able’ due to the Corporation’s financial position.

Had BEC bills been treated as VAT ‘exempt’, the Corporation would have been unable to reclaim the tax (likely to be in the millions of dollars) paid on its inputs.

With its accounts receivables said by executive chairman, Leslie Miller, to be at $187 million, and with an unpaid $120 million fuel bill, forcing BEC to absorb its VAT ‘input’ payments may will have sent the utility monopoly ‘to the wall’.

“BEC is bankrupt, completely bankrupt,” Mr D’Aguilar, a BEC director under the former Ingraham administration, told Tribune Business.

“Even if it had to pay government taxes, it wouldn’t pay them, because it can’t. BEC is one of those corporations that cannot fail. You could exempt it, they would not recover their input taxes, and they still wouldn’t pay.

“The politicians of this country have run BEC into the ground. That Corporation, to all intents and purposes, is bankrupt. It does not have the assets to pay its bills.”

Suggesting that BEC’s business model needed urgent reform, Mr D’Aguilar said its strained financial cash flows meant it was unable to purchase goods in a timely manner or borrow without a government guarantee.

He described BEC’s $187 million in accounts receivables as “absolute madness”, adding that they were equivalent to several months’ worth of revenue.