The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Abaco’s private sector is seeking to create an Economic Development Council for the island, it was revealed yesterday, after becoming tired of being “dictated” to by Nassau.

Ken Hutton, the Abaco Chamber of Commerce’s president, told the Bahamas Business Outlook conference that no one knew better than the island’s businesses and residents how to market it as an investment opportunity to outside capital and businesses.

While the proposed Council would have “input” from the Government, and take the form of a public-private sector partnership, he emphasised that it would be driven by locals as “we cannot rely on Nassau to market our island because they don’t know what it is”.

Urging other major Family Islands, such as Exuma and Eleuthera, to create a similar organisation and structure for their islands, Mr Hutton said: “We’re looking at forming an Economic Development Council for Abaco, run by the private sector with input from the Government.

“We need to be able to attract investment to our island, go out and say: ‘This is what Abaco is’ just as Eleuthera would go out and say this is what Eleuthera is. We cannot rely on Nassau to market our island because they don’t know Abaco is,.

“We can go out and say: ‘You need to come to Abaco’. These are the opportunities in tourism, agriculture, infrastructure, housing. This is one of the things we need to be working on, and this is being worked on at the Abaco Chamber,” he continued.

“We believe that if this is done correctly it will be a good partnership between the private sector and the Government to bring back our island.” Mr Hutton also hinted that the Council idea was born out of growing Abaco frustration with the Government that was further heightened by the latter’s decision to end the VAT break on construction services for Hurricane Dorian reconstruction.

“We need the Government and the private sector working together,” he said. “After two years we’re still receiving diktats from Nassau on how things should work in Abaco. There’s been no consultation with the business community, who are the taxpayers.

“Decisions are being made in hallowed halls in Nassau with no consultation with the business community, and that needs to change.” He spoke out after the latest Disaster Reconstruction Authority (Special Economic Recovery Zone) Order 2022, which took effect on January 1, revealed that the VAT ‘zero rating’ treatment for construction services came to an end on New Year’s Eve.

Services provided in 2021 must have been invoiced before year-end, and paid in full by end-March 2022, for the VAT relief to apply. The end to the ‘zero rating’ means home owners and businesses in Abaco and Grand Bahama will now have to pay 10 percent VAT on contractors’ labour and other service costs.

This creates a potentially significant hike in rebuilding costs, as labour typically accounts for around 50 percent of the contractor’s total price, with the move also acting as a potential incentive for homeowners to ‘go it alone’ and not hire construction professionals - something that could compromise the standard and quality of the rebuilding.

Mr Hutton, while confirming that all other concerns surrounding Dorian-related tax relief have been resolved until December 1, 2022, added yesterday: “We do have an issue that VAT on construction service has not been renewed.”

He said this meant the 10 percent levy will now be applied to bills/invoices submitted by the likes of roofers, air conditioning and tile specialists as well as general contractors. “That acts as an additional cost to rebuilding,” the Abaco Chamber chief said.

“It’s not just affecting a few high-end homeowners or investors; it’s affecting the average homeowner. If you go to Murphy Town, Dundas Town, Spring City, Central Pines, we still have about 40 percent of Bahamian domestic structures destroyed. 

“The vast majority are rebuilding from their own pocket. They don’t have bank loans, the insurance money has dried up. People are funding the rebuild from their own pockets. That 10 percent on costs is a big hit. We’re lobbying very heavily for the Government to reconsider that. The entire community is behind us.”

The Ministry of Finance, in a statement responding to the outcry, pointed out that VAT and other tax breaks on physical goods imports, such as building materials; furniture; furnishings and appliances; hardware supplies; electrical fixtures and materials; and plumbing fixtures and materials had been extended until December 1, 2022.

However, it seemed to imply that the reimposition of VAT on construction services would only impact a small minority of wealthy homeowners who could afford to pay the tax. “It should be noted that the vast majority of persons in the impacted areas, in repairing their property, will purchase materials and employ labour to effect the repairs,” the Ministry of Finance said.

“With the extension of the SERZ Order, those persons will not be affected because building materials will remain tax free and VAT is not charged on labour in these circumstances. The removal of the zero-rating on construction services is expected to impact a minority of cases, mostly high-end properties.

“The Ministry of Finance will continue to process applications for relief under the SERZ on a case-by-case basis and consider any application for special consideration on its merits.”