The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Tax Coalition co-chair yesterday called for “a concerted effort to make the Business Licence more business friendly”, after the Government failed to heed its advice to reduce it to 0.5 per cent for all VAT-registrant firms.

The Coalition for Responsible Taxation, in its fiscal reform position paper sent to the Government earlier this week, had called for Business Licence fees to be lowered to 1 per cent for non-VAT registrants, and to half a percentage point for those that must pay the latter tax.

This, though, was among the many recommendations that the Government seemingly failed to act on in the 2014-2015 Budget address, with Prime Minister Perry Christie merely referring to better administration and enforcement of existing taxes.

Gowon Bowe told Tribune Business: “We would like to see a real concerted effort to make this [Business Licence] more business friendly, to the extent that taxing the gross can make businesses unprofitable after they pay the fee, especially those with high revenues and low margins.”

The Coalition, in its position paper, had urged: “As the tax base is broadened and compliance increased significantly, we recommend that the Business Licence fees be reduced to half of one per cent for all VAT registrants and 1 per cent for non-VAT registrants.

“This tax at current levels, based on gross sales, is a serious disincentive for businesses to reinvest, which serves to slow domestic investments, GDP growth and employment.

“It is evident that businesses have already commenced retrenching efforts and ceased investments, and have been cutting back on employment due to losses sustained from massive Business Licence fee increases imposed in the last Budget cycle,” the Coalition added.

“Reducing this tax will indicate that the Government is concurrently enacting measures to stimulate business development and the economy, and hence increase confidence among businesses.”

This argument echoes the thoughts of Bahamas Motor Dealers Association (BMDA) president Fred Albury, who earlier this week had told Tribune Business that the Business Licence fee be “rolled back” to 0.5 per cent.

Mr Albury, who added that his dealerships had to “scrape” together an extra $500,000 to pay their Business Licence fee this year, said it acted as a deterrent to business investment and expansion.

The Coalition paper also called for the Government to make the Bahamas Chamber of Commerce and Employers Confderation (BCCEC) responsible for registering all businesses in the Bahamas, as this would “remove the Government from the unpopular position of closing businesses despite them operating illegallty”.

Elsewhere, the Coalition’s reform position paper revealed that the study conducted for the Bahamas Hotel and Tourism Association (BHTA) had projected that the initially proposed 15 per cent Value-Added Tax (VAT) would lead to an 11 per cent tourist spending drop.

Referring to the Ernst & Young report, and its assessment of the initial proposal (which eyed a 10 per cent VAT on hotel rooms and food and beverage), the Coalition report said it would have caused a 9 per cent “increase in the price to tourists, as VAT is applied to a range of goods and service.

“Consumer price resistance would result in an 11 per cent reduction in tourist consumption, due to a reduction in the number of visitors and lower levels of consumption by those who do visit,” the Coalition report added.

With the drop in spending came a fall in industry job levels, “with the multiplier effect resulting in a significant loss of jobs” and a drop in tourism’s GDP contribution.

“Alternatively, reducing the proposed VAT rate on tourism industry businesses and implementing other fiscal reform measures would reduce the negative economic impact of VAT,” the Coalition said of the BHTA study.

“A lower VAT rate combined with additional revenue and fiscal compliance measures would raise additional revenue for the Government from the tourism sector and have minimal impact on price competitiveness.”

The BHTA and tourism executives effectively pronounced themselves happy with a 7.5 per cent VAT rate yesterday, even though it was higher than their recommended 6 per cent.