The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s fiscal reform ‘olive branch’ to the private sector “would appear duplicitous and rings hollow” because there is not enough time to conduct proper studies on Value-Added Tax (VAT) alternatives.

This withering assessment was contained in the Grand Bahama Chamber of Commerce’s analysis of the Government’s proposed fiscal reforms, which warned the absence of private sector and consumer ‘buy in’ to VAT meant the Bahamas risked repeating “the Turks & Caicos fiasco”.

The Chamber’s report, which has been submitted to the Government and obtained by Tribune Business, urged the Christie administration to delay VAT’s implementation “for at least another 18 months or until July 1, 2015” to allow businesses and consumers to become familiar with their obligations.

While Mr Christie has given the private sector, and its Coalition for Responsible Taxation, time and pledged assistance to conduct dynamic economic modelling on VAT and alternative taxation forms, the Grand Bahama Chamber report said too little time remained before the Government’s planned July 1, 2014, implementation deadline.

“The Prime Minister and Minister of Finance’s offer to come up with a viable alternative to VAT in a period of less than six months would appear duplicitous and rings hollow, since proper studies and deliberations would require much more time,” the Grand Bahama Chamber said.

Its report added that the Government’s approach to consultation, once again, appeared to be more about telling the Bahamian people what it was going to do, rather than engage the country in an open discussion on the form fiscal and tax reform should take.

“The Government’s approach to implementing VAT does not inspire much confidence within the business community and among taxpayers in general,” the Chamber report said, “since the Bahamian people are only being consulted on the implementation of VAT after the decision to introduce it seems to have already been made.”

This, it added, was demonstrated by the timing of the ‘White Paper’ and draft VAT legislation’s release in February and November 2013, followed by the Government’s educational campaign on the tax’s merits and “the dire consequences the country faces if VAT is not implemented”.

“The lack of real public discourse on this critical decision and ‘buy in’ by Bahamian business and households will likely serve to undermine its smooth and successful implementation,” the Chamber report said.

“In order to avoid a recurrence of the Turks & Caicos fiasco in the Bahamas, the Government should delay the planned implementation of VAT on July 1, 2014, for at least another 18 months, or at least until July 1, 2015, in order for businesses and households to get a better understanding of VAT and other viable forms of taxation.”

The Grand Bahama Chamber urged the Government instead to focus on attempting to “stimulate growth in the economy”, granting Bahamians equal incentives with those offered to foreign investors in industries such as tourism, financial services, communications, renewable energy, fisheries and information technology.

Elsewhere, it warned the Government against levying VAT on electricity bills above a yet-to-be-determined consumption level, given that it will make energy costs prohibitive for even more businesses and households.

“The assessment of VAT on electricity bills will put this essential service out of reach of many consumers, a good number of whom are currently struggling to pay their existing electricity bills without the additional burden of a 15 per cent VAT,” the Chamber’s report said.

“A key mandate of any government is to ensure that essential services, such as water, electricity and garbage collection, are delivered to its citizens and residents at reasonable and affordable rates.....

“The proposal to assess VAT on the electricity bills of residential consumers should be abandoned, and all residential consumers as a class should be ‘exempted’ from paying VAT on their electricity bills.”

The Chamber also expressed concern that Grand Bahama Port Authority (GBPA) licensees might be “exposed to the payment of VAT on bonded petroleum” when filling up their bonded vehicles, something that would breach the Hawksbill Creek Agreement.

“Retail gas stations within the Freeport area should have designated fuel pumps which only sell duty-free and VAT-free petroleum,” the report added.