“I don’t have any trepidation of doom and gloom” about the implementation of Value Added Tax (VAT) in The Bahamas

Lawyer: I Don't Fear Vat.. It'll Be A Boost

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau, The Bahamas




A former Bahamas Bar Association president yesterday predicted that Value-Added Tax (VAT) would “boost” the legal profession, and said: “I don’t have any trepidation of doom and gloom.”

 

Providing something of an antidote to the general mood on uncertainty surrounding the Government’s tax reform plans, Wayne Munroe said VAT’s implementation would create a whole new area of work for attorneys - revenue and tax law.

 

The Munroe & Associates principal told this newspaper that employment in the legal profession might also increase, as many attorneys who currently lacked ‘back office’ accounting systems would likely have to hire extra persons to track, and capture, the VAT due to the Government.

 

Since the Government’s VAT ‘White Paper’ does not treat legal services as ‘exempt’ or ‘zero rated’, Bahamian law firms and attorneys - most of whom generate over $100,000 in annual turnover - will have to add a 15 per cent levy to their client billings and remit this to the Central Revenue Agency, minus the tax paid on their inputs.

 

Asked whether VAT’s introduction might result in reduced demand for legal services, and a loss of business, Mr Munroe suggested it would not.

 

He likened legal services to tobacco and alcohol, implying it was a product many clients could not do without, meaning there was an ‘inelastic demand’ and tax increases would make little difference to this.

 

And, with over 1,000 licensed attorneys in the Bahamas and multiple law firms, Mr Munroe said there was enough competition in the market to keep prices down and dictate how much of the VAT was ‘absorbed’ by the profession.

 

The former Bar president also described the Free National Movement’s (FNM) opposition to VAT as “laughable”, given that the party had previously gone on record as saying it would have implemented the tax had it been re-elected in 2012.

 

Mr Munroe added that what was missing from the VAT discussion was a debate on the ‘size of government’ that the Bahamas needed, as this determined the level of taxation and revenues required to fund it.

 

Arguing that he “can’t imagine” VAT’s impact on the Bahamas would be different from that in the UK, Mr Munroe told Tribune Business that one area he studied while at university was revenue and taxation law.

 

“It’s going to provide a boost to the legal profession,” Mr Munroe told Tribune Business of VAT’s implementation. “If you look at other jurisdictions, there’s a bunch of cases around VAT.

 

“We have very few areas of revenue law here to be explored by attorneys. Now there will be cases of people accused of VAT fraud; collecting VAT and not paying it over; and issues of interpretation of the legislation that is passed and introduced.

 

“It may provide a benefit to the legal profession......”

 

Accountants are the other profession likely to experience an upsurge in work with VAT’s arrival, and Mr Munroe hinted that both they and attorneys might also see the creation of another new business area - advising clients on tax minimisation, or ways they can legally reduce their tax burden.

 

And he added: “It may cause an increase in employment for those lawyers that do not have proper administration systems.

 

“If they’re going to deal with VAT, they have to have persons to administer the system. There will be an increase in the back office to deal with the administrative burden of accounting for the VAT regime.

 

“Some lawyers may have no one to day. It should create more work, and have an employment stimulus effect in the legal profession.”

 

Tribune Business sources have suggested one major query that attorneys have over VAT is whether it will have to be levied on billings charged to foreign clients, with some believing this does not happen in the UK.

 

Given that the Government’s philosophy is that VAT is levied in the jurisdiction where the product/service is consumed, and that such legal services were consumed in the Bahamas, it seems likely that foreign clients will have to pay VAT.

 

Another issue is that the price increases caused by adding 15 per cent VAT to legal billings may cause lower and middle income Bahamian clients to exit the market.

 

This would be especially concerning on land and real estate purchases, as it would expose Bahamians to deals where - if there was no title search by an attorney - they might acquire properties with bad title.

 

Mr Munroe, though, said it was unclear whether VAT would increase the cost of legal services, given that the Bahamian market was intensely competitive.

 

“The market will determine how much of the increase caused by VAT will be passed on,” he told Tribune Business. “I don’t have any trepidation of doom and gloom.”

 

Mr Munroe said what was missing from the VAT discussion was an “ideological” debate on the size of government and welfare state that was desirable in the Bahamas.

 

Since all three political parties backed the notion of some form of welfare state, he added that “some form of taxation” was necessary to finance it.

 

The issue then became one of form and alternatives to VAT, and Mr Munroe said he had only heard income tax being mentioned, which “comes with its own problems”.

 

“On balance, as a country we have to stop opposing and opposing things,” he said. “It’s laughable that the FNM is opposing VAT when it came out in support of it in government.

 

“We have to get past this thing. We seem to have a system where we have to oppose and oppose, and that’s not the Westminster system as I know it.”

 

October 09, 2013

 

Tribune 242

 

Bahamas Blog International

 

What will be Perry Christie Legacy?

The evolving Christie legacy

The Nassau Guardian Editorial
Nassau, The Bahamas

The return of Hubert Ingraham to the leadership of the Free National Movement (FNM) in 2005 marked the beginning of an all-out assault on Perry Christie.  The then revitalized FNM branded deep into the political flesh of the Progressive Liberal Party (PLP) leader disparaging terms, describing Christie as inadequate as a leader and as a man.

When the FNM won the 2007 general election it continued the assault.  Christie experienced much torment in the House of Assembly for the next five years, a consequence of coming second in a two-party election.

Many people still regard Christie as weak.  Now, though, those people must at least acknowledge that he was strong enough to sit in Parliament for five years and take the taunts of men and women who had far fewer accomplishments than he did.  Some who describe themselves as strong don’t have what it takes to sit in Parliament out of power and face the criticisms of the other side.

Christie is now back in the post he lost in 2007.  He has also retired Hubert Ingraham, his friend and rival.  He is 70.  He has been in the House of Assembly from 1977, and was a senator before that.  In the winter of his political career, he now sits as “master of his own fate”.  Christie has a decision to make, the same decision Ingraham and Sir Lynden Pindling had to make.  Ingraham and Sir Lynden messed up that decision.

It is, of course, when to go.  Some may say it is too early to think of such a thing after election wins.  But for the wise, long-term planning is a constant companion.

After scrapping through a controversial 1987 general election, Sir Lynden ran again in 1992 and lost.  He ran yet again in 1997 and suffered a catastrophic defeat.  Ingraham made history in 2007, coming back and becoming prime minister for the third time.  In the face of a down economy, a roadwork debacle and a crime problem he ran again and was sent into retirement in defeat.

Christie can see what happened to his mentor.  He can see what happened to his friend.  He must now choose how it will end for him.

Hubris is the greatest threat to great men.  Thinking they are the best things ever and that they will always be loved, many leaders march over political cliffs confident that their greatness will sustain them.  When they fall and fail, many realize years later that it was obvious way back then that there was a noble and easy to choose exit point different from crushing defeat.

The choice of when to leave for undisputed leaders is a personal one.  No colleague can force you to go.  What must be remembered, though, is that it is not fun for defeat to be your last memory in political life.  For some it is like a nightmare that cannot be escaped.

If Christie chooses his exit strategy involving handing over power at a point of his choosing, and retiring at a point of his choosing, he would prove to be wiser than Ingraham and Sir Lynden in crafting his exit.  He must be careful that he does not wander through these years, having made no decision about his future and ‘accidentally’ running again five years from now because it is just too close to the election.

If Christie wants to run again as leader of the PLP, no one can stop him.  But, he should make that choice rather than drifting into such a decision.  If he departs he should do it properly giving the next PLP leader time to make some impression to the country before heading into the next election.

It will be interesting to see what Christie chooses.  Will he be like Sir Lynden and Hubert, or will he leave while he is on top?

October 08, 2013

thenassauguardian

Bahamas Blog International

Bahamas Motor Dealers Association’s (BMDA) has “big concerns” over the Bahamian Government’s proposed 15 per cent Value Added Tax (VAT) ...given how the tax had impacted their counterparts in other Caribbean countries

Auto Dealers Fear 40% Sales Slump From Vat

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau, The Bahamas



Bahamian auto dealers fear Value-Added Tax’s (VAT) implementation will cause the sector to follow its Caribbean counterparts into a 30-40 per cent sales decline, with one arguing that the proposed tax was “not the right fit for our economy”.

 

Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, told Tribune Business that its members had “big concerns” over the Government’s proposed 15 per cent VAT given how the tax had impacted their counterparts in other Caribbean countries.

 

Apart from the likely impact on new and used car sales, Mr Albury acknowledged that another concern - as had happened in St Lucia and Grenada - was that a 15 per cent VAT on auto service and parts bills would drive consumers to ‘bush mechanics’ and firms that did not have to register to pay the tax.

 

Suggesting that the Bahamas follow the lead established by Turks & Caicos and instead implement a sales tax, Mr Albury urged this nation not to “go down the hell hole” that other VAT-adopting Caribbean countries had fallen into.

 

“If you look at what happened in St Lucia and Grenada, and places where they’ve introduced VAT, it’s had a negative effect with sales down 30-40 per cent,” Mr Albury told Tribune Business.

 

Such a drop in auto sales in the Bahamas post-July 1, 2014, could have a calamitous effect on a sector that is still 50 per cent off its pre-recession high, likely sparking reduced working hours and lay-offs.

 

Mr Albury, the Auto Mall, Executive Motors and Omega Motors head, disclosed that VAT’s impending implementation was already having an impact on buyer behaviour.

 

Given that VAT’s introduction is supposed to coincide with the reduction of import duties and Excise Taxes, he explained that many purchasers were ‘holding off’ in the belief (possibly mistaken) that auto prices would fall due to cuts in the industry’s current tax structure, which ranges from 65-85 per cent.

 

“I’ve already got customers, a rental car business, saying: ‘Why buy any vehicles now at 65 per cent, 75 per cent, 85 per cent? When VAT comes along, the duty will be reduced. I’ll wait’. It’s already having a ‘wait and see’ effect for business out there,” Mr Albury said.

 

And he confirmed to Tribune Business that this newspaper was “absolutely correct” in its understanding that VAT’s introduction in St Lucia and elsewhere had resulted in auto owners there taking their vehicles to ‘bush mechanics’ and small operators in a bid to escape VAT on services and parts.

 

“That would be a big concern,” Mr Albury acknowledged. “If they go to a one-man operation, and not have to pay VAT rather than go to an authorised dealer, we will have to start cutting heads. It will have a spin-off, trickle down effect.”

 

He expressed hope, though, that this would be “offset” by the quality he and other new car dealers offered.

 

“Probably the customers we don’t want will go that way,” he added. “We’ve put a lot of money into technology and training, and a lot of vehicles have to go back to the dealer for diagnosis.”

 

Noting that he had just brought in a $3 million spare parts shipment, with a likely duty rate of 55 per cent, Mr Albury said his “biggest concern” was the timing of VAT implementation, and the impact on unsold stock he had already paid existing tariff rates on.

 

“Do I have to eat the portion of duty that I’ve already paid,” Mr Albury asked. The Government, in fairness, has talked about addressing this issue via the use of bonded warehouses or companies managing their existing inventory such that they ‘run it down’ before VAT implementation.

 

Mr Albury said the BMDA had already had one meeting with the Ministry of Finance on VAT, and was now drawing up “a list of concerns” in response to the latter’s request. A further meeting is supposed to be held.

 

“Right now, we’re picking straws out of the sky,” the BMDA president said on VAT specifics, due to the fact that the legislation and accompanying regulations have yet to be published.

 

“I know the Government has a thirst for revenue, but the VAT tax is not the right fit for our economy,” Mr Albury told Tribune Business. “It’s a service-oriented economy. If it was an economy where we produced manufactured goods, maybe.

 

“I hate to predict doom and gloom, but I don’t think VAT is a good fit for our type of economy, and I don’t see why we have to rush into something that has destroyed other economies.

 

“It [VAT} sounds good on paper, but when you factor in the underground economy..... The Bahamas is already known as a country of pirates, and they will find a way to get around paying VAT,” Mr Albury added.

 

“They might catch a few, but when people start bartering services and goods, it’s going to be like an organised underground market out there.”

 

Mr Albury said both the Cayman Islands and Turks & Caicos had successfully resisted the implementation of VAT, and the latter had instead implemented a sales tax “geared towards tourism” and the industries it hosted.

 

“That might be the best way of doing this,” Mr Albury said, backing a sales tax for the Bahamas.

 

He added that the Turks & Caicos had witnessed a major public education campaign on what VAT meant for them, complete with bumper stickers, t-shirts and petitions, and 
“that might possibly have to happen here”.

 

Mr Albury noted that countries that had tried to increase their VAT rates, such as Barbados, the Dominican Republic and the UK, had either suffered a fall in revenues (driving consumers to the underground economy) or experienced such public pressure that they ultimately reversed course.

 

Calling on the Bahamas not to follow the advice of the International Monetary Fund (IMF) and other multilateral institutions like sheep, Mr Albury told Tribune Business: “We’re one of the jewels of the Caribbean.

 

“Why should we aspire to be like the others going down into the hell hole, the sceptic tank? Let’s do something different, and not be dictated to be the WTO and IMF.... Is it worth joining the WTO for what the consumer is going through?”

 

Urging the Government to work with the private sector to find other, non-VAT, ways to raise revenues while also cutting spending, Mr Albury said: “VAT will have a negative effect on us for a couple of years.

 

“We were just starting to come out of recession, and if we will be hit by VAT a lot of [business] places will not survive.”

 

October 03, 2013

 

Tribune 242

 

Bahamas Blog International

 

The implementation of Value-Added Tax (VAT) in The Bahamas ...without a reduction in current revenue measures ...is a recipe for recession

Vat Move 'A Recipe For Recession'

By AVA TURNQUEST

Tribune Staff Reporter

aturnquest@tribunemedia.net

Nassau, The Bahamas




THE implementation of Value-Added Tax without a reduction in current revenue measures is a recipe for recession, former finance minister and economist Sir William Allen said yesterday.

Sir William said that a 2014 roll out of the new tax system was “not doable”, and likely to result in disappointment and frustration for both the government and the taxpayers.

He maintained that the economy was still “too weak” for an increase of the minimum wage as a way to offset the “pain” of VAT.

Sir William said: “Economic performance is very weak, the economy has not yet recovered from the 2007/2008 period. It is still very weak and the recovery is very anaemic. An increase to minimum wage will be contrary to improvement in the economy, it would work against the improvement of the economy. You have to consider the timing.”

He added: “I agree that VAT will not be without pain, because the very nature of VAT, it’s going to impact everybody in society.

The Government is proposing to implement VAT on July 1, 2014, at a rate of 15 per cent, with the hotel industry to be subject to a lower 10 per cent rate. The Government’s White Paper on tax reform proposes to exempt those companies with an annual turnover of $50,000 or less from having to pay VAT.

Sir William called on the government to clarify whether or not it intended to reduce current taxes to make room in the economy for VAT, adding that whether or not officials could strike a balance between existing taxes and the new structure would ultimately determine the strategy’s success.

“The public is not expecting to pay the same level of custom’s duties along with everything. If that is so, there is gonna be hell to pay in this economy.”

“They’re not speaking to that clearly enough.”

Another worrisome component of the government’s VAT initiative is it’s timeline, according to Sir William, who posited that an ideal roll out would be three to five years.

He said: “My concern with the VAT is that they are seeking to put in place much too short a schedule. I don’t think that sufficient time has been given to putting it in place – to put into effect a VAT system by July 1, 2014, with the best of intentions, that is not doable in my view.”

Sir William said: “It is not doable, or if it is done it will be very inefficient and it’s going to lead to considerable disappointment on (government’s part) in terms of revenue that they collect and a lot of frustration on the part of the taxpayers.”

While Sir William noted that it was obvious the government was hard pressed to close the some three per cent gap between GDP revenue and expenditure, he maintained that it was highly improbable that the government could recoup that figure within the 2014/2015 fiscal year.

Sir William said: “You know what they do when you can tell something is wrong in an economy– if you look at the buildings or parks and they’re not maintained and if you listen to people and they’re not being paid - that’s how you know something is wrong, that’s an indication of fiscal pressure, money pressure.”

“And in light of that it’s going to be difficult to see how they are going to reduce their expenditure. There is going to be pressure for further expenditure.”

Pointing to the cost of the government’s anti-crime initiatives, which he commended, Sir William said: “I see nothing that permits them to reduce their expenditure, I don’t see any possibility on the horizon that permits for that.” 

Sir William said: “I think there’s a very valid rationale for putting [VAT] in place, the government is running a capital deficit and a current account deficit. The current account deficit is the most worrisome because that means that your revenue is not covering your ordinary expenses.

He said: “In the context of a household, if you have to borrow money to pay your rent you’re in trouble. If you have to borrow money to buy food you’re in trouble - that’s a current account expense.”

He added: “That’s a big number, if you consider a GDP of say $9 billion dollars, so that three per cent you’re talking about $270 million. You have to do something about that, it’s not a way that you can continue to operate for a long period of time and in fact we’ve been running like that for much too long.”

Nearly eight months after the release of the Government’s White Paper on Tax Reform, the former finance said he was still unimpressed with the PLP administration’s reform strategy.

Back in July, Tribune Business reported that Sir William was “doubtful” that the Government will hit the target timelines for its two key fiscal objectives – the introduction of Value-Added Tax (VAT) and eliminating the fiscal deficit by the 2015-2016 Budget year.

Sir Allen said that while he would prefer an income tax, the Bahamas has already sold itself as a “tax haven”.

“We boast,” he said, “all our marketing has been ‘no income tax’, and there is a certain fear in certain quarters that once you establish an income tax it’s only a matter of time before it impacts [offshore finance].

Sir William said: “We seek as much as we can to exclude the offshore sector from this tax on the assumption that one of the reasons why they come here is that they come to avoid income tax. One can argue whether that continues to be a valid position, but a lot has changed in the Bahamas.”

October 04, 2013

Tribune 242 

Bahamas Blog International

Welcome to the new Libya

By Abdel Bari Atwan:

WELCOME to the new Libya, a country ‘liberated’ by NATO which now finds itself without the oil revenues which could make it rich, with no security, no stability and assassinations and corruption at unprecedented levels.

Libyan cities destroyed

Last Friday [September 13], the Economist magazine published a report about the implosion of Libya. My attention was caught by the pictures that illustrated the piece – particularly one of some graffiti on the wall of a seafront cafe in the capital Tripoli. ‘The only way to Heaven is the way to the airport’ it read.

The joke is indicative of the troubled state of Libya nowadays following ‘liberation’ by NATO warplanes in the sky and the revolution on the ground which toppled the dictatorial regime of Muammar al-Ghadaffi.

A newborn showing effects of
 bombing with depleted uranium.

Recently I have met many people who are visiting London from Libya and they tell stories of life there which are hard to believe.

The capital Tripoli had no water or electricity for a whole week.

The armed militia dominate and rule the streets in the absence of a workable government, a national security establishment and basic municipal services.

Onoud Zanoussi, the 18-year-old daughter of Abdullah Zanoussi, the former chief of Ghadaffi’s security establishment, was kidnapped on her release from prison following seven months behind bars accused of entering her country illegally. She was abducted in front of the prison gates and the abductor was one of the guards!

Two years ago, the British and French business community sharpened their teeth and rubbed their hands with glee in anticipation of their share of Libyan reconstruction. Now there isn’t a single foreign businessman in Tripoli, all of them ran for their lives after the assassination of the American Ambassador and attacks on several foreign Embassies and Consulates.

During the NATO bombardment, news from Libya dominated the front pages and was the first news item on every Western and Arabic television station. There was 24-hour coverage about the Libyan Liberation miracle and the great victory achieved by NATO and the revolutionaries. Nowadays it is very rare to find a Western reporter there and even more rare to read a decent report about Libya and what is really going on there.

Oil was the main objective and the real reason for the NATO intervention; but oil production has all but ceased due to a strike by security guards on the oilfields and export terminal. The ostensible reason for this strike is the demand for a pay rise but there is another, equally powerful, motive – they are protesting the demands of various separatist movements who are calling for self-rule for oil-rich Barca (Cyrenaica) with its capital in Benghazi. Most of Libya’s oil reserves are situated here.

Rather than the local or national government, a militia is in control of most of the oilfields and the export terminal; it has started to sell huge amounts of oil on the black market and is trying to expand these activities leading Ali Zidan, the Prime Minister, to threaten to bomb any unauthorized oil tanker going anywhere near these sites.

The irony is that the same thing is happening now in Eastern Syria, where the militia and local tribes are in control of the oilfields in Deir Al-Zour, refining the oil themselves by hand and selling it on illegally. The same thing is still happening in the south of Iraq.

Iraq and Libya, of course, have ‘benefited’ from Western intervention and Britain and France have been proud to repeat what the mother of the West (the U.S.) used to say about Iraq; first in Libya and now – of negotiations fail – in Syria. That is: intervention will bestow great sophistication on the affected country which will immediately become a model of prosperity and stability and lead the way for other Arab countries, which are ruled by dictators, to invite and welcome military intervention. In fact, this model has produced the worst kind of anarchy, failed security, political collapse and disintegration of the state.

Chaos rules in Libya. The assassination of politicians and journalists has become normal news in today’s Libya, to the extent that Colonel Yussef Ali al-Asseifar – who was charged with investigating a rash of assassinations and arresting the people behind it – was himself assassinated on August 29 when men from an unidentified group put a bomb under his car.

On the anniversary of 9/11 last week, a huge bomb ripped through the Foreign Ministry building in Benghazi.

Human Rights Watch has highlighted another atrocity in Tripoli on August 26, 2013, at the Main Corrections and Rehabilitation Institution, known by its former name al-Roueimy, where around 500 detainees, including five women, were being held. The prisoners were on hunger strike to protest the fact that they were detained without charge and in the absence of a fair trial. Unable to produce its own security detail, the government called in the Supreme Security Committee – composed of former anti-Gadaffi militiamen – to put down the uprising. Militia forces stormed the prison and shot the prisoners with live ammunition, wounding 19 people.

The Prime Minister of Libya – Awadh al-Barassi – resigned on 4 August and was replaced by Ali Zeidan. Then, on 18 August, the interior minister, Mohammed al-Sheikh, resigned after only three months in post. He cited lack of support from Ali Zeidan and the government’s failure to deal with widespread unrest and violence, to gain the people’s trust, or to adequately fund state agencies to provide the most basic services.

Libya is simply disintegrating along tribal and geographical fault lines. Most of its people are in state of fury, including the Berbers in the south, and national reconciliation is a distant prospect.

Popular frustration is at its peak; yet when demonstrators took to the streets outside the barracks of the powerful ‘Libyan Shield Brigade’ to protest the unwarranted power of the militia, 31 people of their number were shot dead. The militia act completely outside the law.

Suleiman Kjam, a member of the parliamentarian committee for Energy, told a Bloomsberg reporter that the government is now spending its financial reserves after the production of oil dropped from 1.4 million barrels per day earlier this year to less than 160,000 bpd. He warned that if this situation continues, in the next few months, the government will not be able to pay the salaries of its employees.

The Gadaffi regime – and we say this for the millionth time – was an oppressive dictatorship but Libya nowadays, with corruption at it peak and security non-existent, is difficult to understand or accept. Especially when we remember that Libya was liberated by the most sophisticated and advanced countries on the planet, according to Western criteria.

Mr. Mohammad Abdel Azziz, the Libyan foreign minister, surprised many in the West and Arab world alike on 4 September when he objected to imminent U.S. air strikes on Syria at a special meeting of the Arab League he was chairing to discuss possible intervention.

Maybe Mr. Abdel Azziz, like many of his Libyan people, has formed his opinions as a result of the experiences of his own countrymen after Western military intervention.

We hope that the people of other Arab countries, and particularly Syria, will learn from the Libyan example.

It is true that some suggest that this is a temporary state of affairs for Libya and that following this transitory period, stability will reign. They advise us to be patient.

We hope their prophecy will prove to be correct but remain extremely skeptical with Iraq and Afghanistan also before our eyes. (Global Research) 

October 03, 2013

Granma.cu 

Bahamas Blog International

If the implementation of Value Added Tax (VAT) in The Bahamas is “done right” ...it could be the solution to the nation’s financial problems

Vat Deadline 'A Recipe For Disasters' Warns Fnm

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

Nassau, The Bahamas


THE Christie administration is “preparing a recipe for disaster” by continuing to forge ahead with an aggressive schedule for Value Added Tax implementation, FNM chairman Daron Cash warned.

 

While the government has said it will stick to its July 1, 2014 deadline for enactment of the new taxation system, the draft legislation has yet to be completed – despite the fact that State Finance Minister Michael Halkitis originally promised this would be done as early as May of this year.

 

In addition, the promised education campaign has yet to begin, resulting in widespread confusion about what VAT will mean for consumers or businesses.

 

For these reasons, the FNM suggested that VAT’s implementation date be rescheduled, saying moving too soon could do more harm than good to many Bahamians who are already struggling to make ends meet.

 

“It means increased taxation,” Mr Cash said, “there is no question that the Ministers of Finance, both the Prime Minister and Mr Halkitis, have been less than full in their explanation to the Bahamian people.

 

“At the end of the day they will be taking more money out of the average person’s pockets. But the sad reality is that they have done such an abysmal job in ensuring that the average person understands what it’s going to mean for them on a daily basis.

 

“While breadbasket items might very well be minimally impacted by VAT, the reality is we are talking about 15 per cent in a lot of areas higher than what people are paying now. So 15 per cent on top of already high cost items will lead to the average person having higher bills at the end of the month.”

 

However, if VAT is “done right”, Mr Cash believes it could be the solution to the country’s financial problems.

 

“We have always said that even an FNM government would have considered VAT. But you cannot impose new taxes in an already fragile economy. They appear to be doing too much too soon.

 

“If you listen to members of the business community, many of them don’t have the information to be able to plan sensibly, reasonably and in a sufficient time for their businesses to be able to adjust.”

 

Mr Cash urged the government to reconsider the haste at which it is moving to pile more taxes on the average Bahamian.

 

October 02, 2013

 

Tribune 242

 

The Value Added Tax (VAT) debate in The Bahamas ...and the Bahamian politicians, politics and healthy political discourse involved...

Bahamas will ‘pay savagely’ for VAT politics

Consultant fears VAT delay would lead to credit downgrading, loss of policy choices

BY ALISON LOWE
Guardian Business Editor
alison@nasguard.com
Nassau, The Bahamas

The Bahamas will “pay savagely” if plans to implement valued added tax (VAT) gets “bogged down in politics”, a consultant to the government has warned, suggesting that delays in implementing the new revenue measure could lead to serious fiscal woes.

Noting some of the negative response to the proposed new regime to date, Ishmael Lightbourne told Guardian Business that there is “no question” that the new tax regime would represent good fodder for political fireworks when the legislation is introduced in Parliament.

However, pointing to the situation in crisis-stricken Greece, Lightbourne said that The Bahamas’ choice is one of either implementing VAT – or some other revenue raising measure – or being forced to implement new taxes or expenditure cutbacks by “external forces”, like the southern European country.

“I think the essential issue is the country’s fiscal position which is consistently showing a deficit gap, and that is not getting better from our present tax regime, and we are putting ourselves further and further into deficits and national debt,” he said.

“In that position, my focus has always been that if we do not get off that path, we’ll be losing a chance to voluntarily make these changes in terms of expanding the revenue base or reducing the cost of government. When we can’t do that ourselves, external forces come in and impose certain conditions. If you look at Greece, Greece has been under IMF watch or care, and they are having to do things like cut some 12,500 public servants. Those are the types of issues we want to try to avoid.”

Highlighting a continuous “gap” between government’s revenues and expenditures in recent years that has led to a spiralling national debt, which stands at 60 percent of GDP and is projected to hit $4.8 billion by the end of this fiscal year, Lightbourne suggested that The Bahamas’ fiscal situation could take a turn for the worst if a further downgrade occurs as a result of international agencies perceiving that The Bahamas is not committed to fiscal reform, which would increase borrowing costs.

The situation to date is already “pretty dismal”, he highlighted in a recent presentation to the Bahamas Society of Engineers, with the government borrowing to pay administrative and operational expenses such as salaries racking up around $200 million in recurrent deficits alone per year as a result.

To date, it is unclear exactly how the official opposition, the FNM, will respond to the VAT plans. Earlier this year, former junior finance minister Zhivargo Laing suggested that had the party been re-elected during the last

general election, it would have implemented VAT within two to three years of taking office.

In a recent statement, FNM Chairman Darron Cash suggested there need to be more “public discussion” on VAT and the government was not doing a good job on the education process.

The Democratic National Alliance, headed by former FNM Minister Branville McCartney, has recently come out against the tax. In an email sent to supporters yesterday entitled “VAT will destroy us”, the party which ran a slate of candidates in the last election tells supporters that if VAT is implemented, The Bahamas “will never be the same”.

“The cost of living will be going up, the cost of your food, your cable bill and school fees!” said the party.

During an appearance on Guardian Radio’s “Coffee Break”, DNA Chairman Andrew Wilson charged that the tax will destroy the middle class and suggested the government consider a sales tax instead.

Lightbourne said: “You have to look in the real world of politics, any opportunity that presents itself for the opposition to catapult itself in the political arena, they will take. That’s the nature of politics. Now whether they will do that to the detriment of country and allow government to be the fall guy, I’m not sure, [but] that may be their strategy...”

The VAT consultant said that in a recent presentation to the Killarney Constituency Association on VAT, Opposition Leader and Killarney MP Hubert Minnis “made no comment.”

He said that a presentation on VAT to the entire parliament has “yet to come off” but he is hopeful that one can be made shortly.

“They need to be able to see the issues and challenges that we face as a country and how we go about resolving those issues. I’m still hoping that will happen so we can bring to their attention the kind of decisions that need to be made. No matter who is government these issues will present themselves and won’t go away.”

“It’s not VAT or nothing, it’s got to be VAT or something, in order to close this enormous gap we have growing by the year,” he added.

Pauline Peters, another newly-hired VAT consultant and a former head of Grenada’s inland revenue service who led the implementation of VAT in that country, told Guardian Business that while that country may remain challenged with reducing its debt burden, the introduction of VAT in 2010 in Grenada has been helpful.

“It has certainly raised additional revenue that can assist in that process (of reducing debt). One would recognize that the revenue is going to the consolidated fund and the government would prioritize with respect to how that is spent.

“There would’ve been areas that would’ve benefited from increased revenue, such as infrastructural development in the country, the social safety net would’ve been increased, and other financial issues that government would’ve been dealing with.”

October 01, 2013

thenassauguardian

Bahamas Blog International