The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government's forecast of $400m in extra VAT revenues is "more than risky", the Exuma Chamber of Commerce's president warning: "I can almost guarantee it won't happen."

Pedro Rolle yesterday told Tribune Business that the 60 per cent VAT rate hike's impact will be felt more heavily across the Family Islands, where additional shipping costs and volumes/economies of scale typically result in higher prices and living costs.

Joining the chorus of those "sceptical" as to whether a 12 per cent VAT will yield a matching increase in gross revenues to $1.061 billion, Mr Rolle said the move was likely to depress investor confidence and consumer spending following an 18-month period of "strong growth" for Exuma's economy.

Giving an insight into the tax increase's implications beyond Nassau, he revealed: "It's difficult to reconcile that they came out with such a drastic rate increase.

"The first thing it does, the very first thing that happens, is it depresses the enthusiasm for investment, and Exuma is highly dependent on investment. I think we've been growing because of the opportunity for investment in Exuma.

"The past seven years have seen gradual growth. Over the last year to year-and-a-half, growth has really been strong and encouraging in terms of construction and projects being pushed. It's really been a positive economic environment," Mr Rolle continued.

"The challenge we face is this 12 per cent weighs heavily on the cost of real estate. It's going to cause people to have second thoughts.... Straight across the board, it's difficult to see how this does not negatively impact the economy of Exuma."

Mr Rolle suggested the likely VAT-induced economic slowdown will, in turn, reduce Exuma's contribution to the Public Treasury. "I don't see how it's an increase in terms of the Government achieving its goals," he told Tribune Business.

"It's not as if one can say we were collecting $10 million for Exuma and now we're collecting 60 per cent more. It doesn't take into account human nature. I think it's more than risky. I don't think they're going to see a 60 per cent increase in VAT collected. I can almost guarantee that won't happen. That is our concern."

Higher living costs in comparison to Nassau also mean that Family Islands will bear a disproportionate share of the VAT increase's burden, Mr Rolle argued.

"If the VAT tax is now 12 per cent, we can reasonably assume shipping costs may go up by 15 per cent," he said. "The tendency is that when taxes increase, merchants tend to take the opportunity, unfortunately, to build in a cushion for themselves and it's the consumer that feels this.

"The impact on the Family Islands is felt even greater. It is our hope that it is not too late. I think they [the Government] ought to have further consultation. I think it's a bad idea."

Mr Rolle warned that Exuma's unemployment rate would also likely increase as a result of VAT's increased prices and living costs, with fewer grocery purchases and restaurant meals the likely result.

"We're going to have a higher unemployment rate from this one decision," he said. "I would think the Government considered that. I can't see them having made this decision without considering the multiplier effect. But I'm sceptical of this move, and we'll just have to wait and see."