The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior official yesterday denied that the Government was set to eliminate Value-Added Tax (VAT) on health insurance premiums, as there was nothing “to offset” the resulting revenue loss to the Treasury.

John Rolle, the Ministry of Finance’s financial secretary, told Tribune Business it had submitted no proposal to exempt health insurance - and private sector healthcare services - from the 7.5 per cent levy.

“We’ve briefed the insurance industry, and we’ve told them that for any considered adjustment in VAT exemptions, there is a consequent impact that the Government cannot ignore, which is how does it offset any loss of revenue,” Mr Rolle told Tribune Business.

“From that standpoint, any proposal made to the Government has to be sensitised as to how the Government is going to recover any offsetting revenue.

“We’re not proposing any changes, as clearly there is going to be a ripple effect on the healthcare sector.”

Mr Rolle’s response effectively dismisses hopes raised by the Bahamas Insurance Association’s (BIA) chairman, Emmanuel Komolafe, who told The Tribune on Tuesday that the Ministry of Finance was considering making health insurance premiums, and private healthcare services, ‘VAT exempt’.

The BIA, in its proposed alternative to National Health Insurance (NHI), argued that both the healthcare industry and associated insurance premiums should be ‘exempt’ from VAT because its imposition ran counter to the Government’s goal of making medical care more affordable.

“Healthcare should not be penalised by taxation. The BIA urges the removal of Value-Added Tax on all medical services and medical insurance in the interest of making healthcare more accessible and affordable,” its proposal argued.

“Imposing VAT on essential medical services and insurance increases costs and inhibits people from seeking necessary care.”

However, any VAT ‘exemption’ would impose other costs on the healthcare industry and insurers, as they would be unable to reclaim or ‘net off’ the 7.5 per cent levy’s imposition on their input costs.

Mr Rolle yesterday argued that it was “more transparent to allow it [VAT] to work it was way through the system”, after being levied upfront.

“The Government will have the option of looking at how it supports the healthcare system based on revenue generated directly and indirectly from the sector,” the Financial Secretary told Tribune Business.

“From a technical point of view, we believe it’s more transparent to have this cost mechanism reflected in the service delivery, and have the Government augment and provide support for service delivery.

“We in the Ministry of Finance have not made any proposal, and he [Mr Komolafe] may have over-emphasised the fact this subject comes up from time to time in the industry. We make sure the industry understands we are looking at this proposal in a comprehensive way.”

The Bahamian insurance industry has long argued that it should be completely ‘exempt’ from VAT, in common with its counterparts in almost all other countries that have implemented the tax.

The Government, though, has taken the opposite view given that it would undermine the concept of the Bahamas having the broadest-based VAT. Its position has also likely been influenced by the New Zealand consultants who aided VAT’s implementation, given that it is one of the few countries that also imposes the tax on insurance premiums.

Mr Rolle, meanwhile, said the Ministry of Finance would be working with the NHI Secretariat “in terms of the more forward looking aspects of healthcare financing” as the NHI roll-out gathers pace.

He declined to comment, however, when asked whether he was set to succeed Wendy Craigg as Central Bank of the Bahamas governor.

Tribune Business sources in the commercial banking industry confirmed to this newspaper that Mrs Craigg had informed the sector she is due to step down from her post at year-end.