Don't Be 'Deer In Headlights' If Vat Not Ready July 1


The Bahamas cannot adopt “a deer in the headlights” approach of Value-Added Tax (VAT) is not ready to go come July 1, a Tax Coalition co-chair yesterday calling for a phased approach to reform.

Gowon Bowe said that if the Government knew it was not going to make its implementation deadline, it had to avoid going into “a state of paralysis” and have short-term initiatives on hand to “steady the ship” while the best long-term fiscal reforms were developed.

Agreeing that practical readiness was where the Bahamas had “a tight timeline”, Mr Bowe said there were questions over whether the Government had its own VAT collection systems in place, and if the persons to staff the Central Revenue Agency (CRA) had been hired and trained, “given that this tax has more elements to it”.

“Have they engaged the business community in meaningful and tangible interfacing and testing of how the system works,” the Coalition for Responsible Taxation’s co-chair asked. “These are things of significance. If you’re behind the timelines, you have to look at your ability to forge ahead.”

Mr Bowe and Frank Comito, executive vice-president of the Bahamas Hotel Association, confirmed that “none of the major players in the hotel sector and business community” had been involved in any system testing yet.

And they added that with the new Tariff Schedule yet to be published, and the implementation guidance notes not finalised, it was impossible for companies to get their software and systems ready for VAT compliance.

“Time is not in their favour for July 1,” said Mr Bowe, who added that the Coalition was also set to meet with the Bahamas’ World Trade Organisation (WTO) negotiating team to discover what the nation’s likely reduced tariff commitments were, and if they was any “flexibility” in when they could be implemented”.
“We will not cause delay for the sake of delay,” Mr Bowe added.

Mr Comito reiterated that the resort and tourism industry was “strongly opposed” to the July 1 VAT implementation date, as both public and private sectors were “not ready” from any standpoint.

“There are huge costs involved in both the hardware and software systems changes from all sides to comply with the requirements and be ready,” he added.

“We believe additional economic impact analysis is essential if we are to enter this in the most complete way, and if we don’t it could wreck the Government’s revenue projections.

“Thank God the Prime Minister has indicated he is receptive to whatever analysis the private sector brings to the table. We think that’s the most sensible approach the Government could take.”

Mr Comito said the resort and tourism industry had engaged Ernst & Young to assess the likely “net effect” from VAT and other tax/fiscal reforms on the sector’s competitiveness, growth and the broader economy.

Mr Bowe, meanwhile, said the Bahamas had to improve the “dismal” performance of the existing tax system, with both Customs and the real property tax department performing below “50 per cent of revenue potential”.

And, when it came to the Government’s VAT education efforts, he said these had not focused on likely cost of living increases and alternatives. Last February’s ‘White Paper’ had been “very cursory” on the latter and other tax options.

Neil Hartnell
The Tribune
Published March 14, 2014