The Tribune

By NATARIO McKENZIE

Tribune Business Reporter 

nmckenzie@tribunemedia.net

THE Government has “priced Bahamian retailers” beyond their competition, an industry player yesterday warning this was also boosting tax evasion and the informal economy.

Tara Morley-Nolan, a Bahamas Chamber of Commerce and Employers Confederation (BCCEC) director, argued that the problems facing the global retail sector are only exacerbated in The Bahamas by high import duties and business operating costs.

“High customs duties are extremely prohibitive to the retail sector’s ability to bring in sufficient assortments without taking huge inventory risks,” said Mrs Nolan, who is also Cole’s of Nassau’s general merchandising manager.

“Additionally, it puts undue pressure on the pricing structure, which burdens consumers with unnecessarily high prices. This creates huge issues for local retail, as both locals and tourists opt to shop abroad rather than spend money in the Bahamas.”

Mrs Nolan, who also serves as co-chair for the Bahamas Federation of Retailers, added that the digital revolution had changed the way shoppers consume, giving them instant access to price comparisons via the Internet.

“Generally, prices are higher in the Bahamas on goods on which a significant rate of duty is applied,” she said. “Bahamians and expat residents living in the Bahamas travel to Florida frequently to purchase goods that they deem to be more expensive locally.

“Upon returning, many Bahamians and expat residents often do not declare these purchases, especially if the items are easily concealable in a suitcase or easily passed off as used, such as clothing, footwear, accessories, personal items and small electronics.

“The list of such items is long and inexhaustible, and the Government has priced the country beyond the competitive range in many of these categories. These undeclared purchases made in Florida represent a huge portion of our economy, and represent both a loss in sales to local businesses and a loss in tax revenue to the Bahamian government, as neither duty nor VAT is collected on those purchases.”

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), yesterday agreed that clothing and apparel retailers are among the most challenged sectors in the Bahamian economy.

“Clothing and apparel retail have some of the greatest challenges, as they are not only disadvantaged by the fact that they have seasonal and fashionable shelf lives, but goods are all too often bought back in consumers’ suitcases with no duty being paid,” Mr Myers said.

“There is simply no way that Bahamian retailers can ever compete with these factors, and nor is there any way for Bahamas Customs to determine new from used clothing and apparel.”

Mrs Nolan said high import duties have also produced growth in the informal retail sector and illegal trade activities, a point Mr Myers also shared. “Too often, as we travel we see persons with several bags of what ends up being commercial goods that are not declared as such,” she said.

“Businesses also operate illegally by means of either falsified invoices in order to cheat Customs, or delinquent payments on NIB or Business Licenses and the list goes on. The air courier industry is also a vehicle for fraud. While a number of couriers operate legitimate business, others rely on a business model that requires some form of illegal or illicit activity to make it work.

“Bahamas Customs is very familiar with the courier challenge and has been working hard to combat the illegal activities of various operators. The more effective Customs is in its interdiction effort, the better for the Bahamas’ retail industry. A transparent and level playing field makes for a healthier, more efficient business which can compete.”

Mr Myers told Tribune Business: “Many sectors of the retail industry will continue to die a slow death until the people with a vested interest in the economy start acting proactively.

“One can easily argue that it is not the Bahamian retailers alone that must become more innovative and competitive, but also the Bahamas Government. Ultimately, the focus must remain on growing the Bahamian economy as this is the only salvation. Careful analysis of the retail industry is desperately needed, and long overdue, so as to determine how best to grow the sector and support local retail employment and businesses as opposed to foreign.”

Mrs Nolan said the Bahamas needs to adapt to changing market conditions and focus on ways of stimulating growth.  “Travel retail is expected to grow by 8 per cent per year between 2017 to 2021, yet we as a country have not done anything to support this sector,” she said.  

“Downtown continues to be a mess, and duties need to be eliminated or reduced to a nominal amount on soft goods, such as clothing and apparel and gift items. As tourism is the anchor of our economy, it would seem travel retail would be an easy sector to target for growth with immediate impact.

“There is so much focus on concessions for foreign-owned hotels to stimulate jobs growth, yet the wholesale and retail sector employs the largest percentage of Bahamians in the private sector,” she added.

“Growth in local retail would immediately stimulate the employment rate in the country in a sector of the economy which is Bahamian-owned. There needs to be more focus on how to support and grow our local retail industry, rather than continuing to send Bahamian consumers abroad.

“The Government needs to work on strengthening Customs controls, eliminating illegal roadside businesses, lowering duties and reducing the cost of doing business in the Bahamas.  Each of these actions will lead to lower prices and reduced spending overseas.

“Retail will become another asset of the tourism product offering. The more money spent in the Bahamas on retail goods, the more money to go around in our economy, the more jobs created, more taxes generated, less government spending on social services, and the greater our GDP growth.”