The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Blaming the VAT hike for business declines is "the easy answer", Exuma's Chamber of Commerce chief said yesterday, as the 12 percent rate is felt far more keenly in the Family Islands.

Pedro Rolle warned against rushing to judgment over recent "noticeable" sales declines at Exuma's restaurants and food stores, suggesting it was "too early" to blame the VAT rate increase when various factors may be involved.

A realtor by profession, the Chamber president said he will also be watching the island's peak September-November season closely to see whether buyers - particularly in the foreign second home sector - have been "scared away" by the tax increases and change to the definition of owner-occupied property.

"There seems to have been a noticeable decline in the restaurants but they don't have numbers," Mr Rolle told Tribune Business of the weeks immediately following the VAT rate increase. "They're not saying ten percent less, 20 percent less, but they have noticed a decline in the numbers coming in.

"I'd hate to put that all on VAT. One of the reasons could be it's summer. So many people travel, and we have less visitors in summer, so it could be a combination of factors. We'll be better able to assess the issue in September, as it's really difficult to know in summer."

Mr Rolle said one of Exuma's major food stores had informed him it had seen a decline in business as well, but this was difficult to assess as well given that sales typically dropped off in summer.

"All he's saying to me is it reduced," the Exuma Chamber president added, suggesting the poor quality of business record-keeping on the island made it hard to determine the cause of such trends.

"The easier answer is to blame it on VAT, but that's the easier answer and it might not be the correct answer," Mr Rolle told Tribune Business. "I'm a little bit hesitant to talk about that in terms of the reasons for the decline. I think it's a little too early to tell."

In his industry, real estate, he suggested it might take three months before the impact from 12 percent VAT and other budget-related tax changes is truly felt. "Our expectation is this year will be a better year for real estate than last year," Mr Rolle said.

"Between September to November is the high season, and if that doesn't happen we'll be able to tell definitely if people have been scared away by the VAT. We don't want to be quick, but equally we don't want to be lazy in coming to these conclusions. Let's give it a while and see how it works out."

Roderick Simms, head of the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) Family Island division, told Tribune Business that the impact from the 60 percent VAT rate hike was being felt more heavily in these locations because the cost of living is higher than in New Providence.

"The challenge is the cost of living has always been a lot higher in the Family Islands than Nassau because most goods first come into Nassau," he said. "They then have to be shipped to the Family Islands.

"That incurs an extra cost that has VAT attached to it. Costs are already more expensive in the Family Islands than Nassau. The Family Islands are complying but it's burdensome on an already-high cost of living."

Mr Simms expressed concern about the impact the VAT rate increase, and associated Real Property Tax Act reforms, may have on the foreign second home market that is a key driver of many Family Island economies.

"If second home owners decide to put a pause on the funds invested or the amount of funds they're pumping in, it has a ripple effect on second home employees," he added.

Mr Simms said the Bahamas had "to wait for the true effect of 12 percent" VAT to fully materialise, given the waivers and transition periods provided to sectors such as construction and the hotels.

"It's a wait and see approach because 12 percent has not had its full effect," he told Tribune Business. "There are still some large components that have not caught up with 12 percent, and the construction sector is one of them.

"We're in the infancy stages, although information is coming back to give us a glimpse of 12 percent's effects. It's when these components take root that we'll see the real repercussions of 12 percent on our economy."