The Tribune

By RASHAD ROLLE and DENISE MAYCOCK

Tribune Staff Reporters

GRAND Bahama was already struggling – then came the budget announcement that value added tax will increase to 12 percent next month.

On an island where abandoned shop buildings line the landscape, residents and business owners now have a new headache to lament.

Businessman Shuffel Hepburn, operator of the island’s Subway franchise, closed one of his stores when the Grand Lucayan resort shut down in 2016. He is now prepared to make similarly difficult decisions.

“I will have to determine the rate of the actual impact (of VAT) on the day-to-day operation and then increase already high sandwich prices, as well as employee salaries,” he said in a recent interview.

“This will not be good for business going forward. We already have a store closed in Port Lucaya with no idea when or if the hotels will ever be sold. The government’s plan is to tax The Bahamas into success and we are certain how disastrous that will be.”

Like people elsewhere, Mr Hepburn is questioning what the Free National Movement’s election campaign slogan –– “It’s the People’s Time” –– is worth.

“There seems to be a disconnect between the government and the theme upon which they were elected,” he said. “They have either forgotten their own slogan or they were never sincere about it in the first instance.”

Darren Cooper, proprietor of D’s Car Rental Ltd, knows what he will do because VAT is going up: he will reduce his business branches to just one location and let go two of the company’s five employees.

Unemployment on the island had fallen from 12.4 percent to 12.1 percent in the most recent Labour Force survey, with 3,735 people there said to be unemployed.

Now, VAT “is going to cause a drastic loss of jobs because a lot of companies in our sector are going to cut back and we’re going to start with the employees,” said Mr Cooper, president of the Bahamas Car Rental Owner’s Association.

“When some of us have two maintenance guys and two office clerks, we’re going to cut back. I went from 12 employees down to five last year, now I’m trying to go to three.”

D’s Car Rental was established in 2008 at the height of the Great Recession. Back then, Mr Cooper got a turnover of $30,000 to $40,000 a month. Today, despite recent statistics projecting the economy will grow at a modest pace, his business is “barely scraping” $11,000 a month.

“We feel the government should have considered exempting Grand Bahama from VAT at this time until something could happen,” he said. “Instead, you giving us a hike in police record fees, an increase in licencing of vehicles and the list goes on. People just focusing on the 12 percent for VAT but not looking at these other fees. Yeah, you giving me a lower rate on cars but I got to be able to afford it to get it. Yeah, you giving me an increase in exemptions but I have to afford travelling. I haven’t travelled as a business owner in two years. I haven’t received a salary from my business in eight months, only taking out loans.”

To reduce the burden, Mr Cooper wants the government to revisit rules about which businesses are mandated to register for VAT, noting he now operates under the threshold for mandatory VAT registration but has not been able to deregister. Under the 2014 law, only businesses making a turnover of $100,000 or more per year are required to become VAT registrants. While this allows them to recover input costs for paying VAT on goods and services needed to operate their business, it has also meant customers avoid companies that are VAT registrants in favour of those that do not charge the tax. One Grand Bahama business recently registered for VAT and went from making “$2,000 a day to scraping $500 a day,” Mr Cooper said.

“When we buy cars, we are exempt in the sense that whatever VAT we pay on those cars for the company we get it back,” he added. “Our utility bills, our rent and those kind of stuff, we get back what we pay for VAT. But if your return is $2,000 and you haven’t collected that in your three month period by selling goods to customers the tax collectors don’t want you to have the credit. You have to collect VAT to get back the VAT you paid. How could you do that without customers?”

Deputy Prime Minister Peter Turnquest has said the Minnis administration wants to increase the VAT rate so the country could plough through its fiscal consolidation period as quickly as possible and the tax burden can later be relieved off Bahamians.

People like Mr Cooper are sceptical this will happen.

“Governments don’t ever go down on taxes,” he said. “Moreover, how do you squeeze milk out of an empty carton? Yeah, in three years’ time we’ll look good but people are dying and losing their homes today. We hear stories of people sleeping on the beach after losing their homes and their jobs.”

Mr Turnquest, the MP for East Grand Bahama, was asked about the budget’s impact on that island during a press conference two weeks ago.

His statements showed the opening of the Grand Lucayan Hotel, critical to the revival of the Port Lucaya area, remains elusive.

“The good news,” he said, “is the West End project is really, really close.” He was referring to the $2.5bn deal to purchase the former Ginn Sur Mer property. “I’m much more comfortable saying that one will be completed in June and that is going to be a significant development on the West End of Grand Bahama and we are looking forward to the contributions that will make to employment and turning that economy around. We’re working on a number of initiatives for Grand Bahama.”

Mr Turnquest has noted the decision to zero-rate VAT on bread-basket items is intended to offset the increase in the VAT rate.

But Celia Mackey, a single mother on Grand Bahama, isn’t convinced it will make much of a valuable difference.

“There is no VAT on corned beef, but why don’t they exempt VAT on tuna?” she asked.

Although tuna was not originally included in the exempt list, Mr Turnquest announced last week that it has been added.

“We have to pay VAT on meat and vegetables and that is the bulk of what we buy in the food store,” Ms Mackey said.

She noted July will be tough because VAT will be removed off bread-basket items in August, a month after VAT is increased to 12 percent.

“The government should have at least given us until January of next year,” she said. “They should give us more time to prepare for this. I thought the FNM was against VAT, now they raising it. If anything, they should have lowered it or left it at 7.5 percent for Grand Bahama.”