VAT draft legislation and regulations welcomed, more information sought

Mon, Dec 2nd 2013, 11:01 AM

The government's release of the value-added tax (VAT) draft legislation and regulations via its website on Friday elicited grateful responses from members of the business community yesterday, but several noted they still could not make a realistic determination of VAT's impact on their operations without the release of the details surrounding what changes will be made to import duty and excise taxes when VAT is implemented.
The legislation was released along with a Guide to VAT Legislation document, but no indication was given as to when the tariff schedule will be released.
The legislation broadly remained the same as the earlier draft obtained and publicized by The Nassau Guardian earlier this month, with a handful of significant adaptations including the exempting of all insurance sectors from VAT, and the addition of VAT to residential electricity supplies for those who consume over a given amount of energy per month. The previous draft suggested only commercial energy bills would be "vatable".
A 15 percent VAT rate for most businesses was confirmed, with VAT on hotel accommodation and hotel food and beverage purchases to be charged at 10 percent. One hundred thousand dollars in actual or anticipated annual revenue will be the threshold for VAT registration, and filings will be made on a monthly basis.
The latest version of the legislation, which the Guide suggested was being released to enable "an intensive and extensive public education and consultation exercise" did not appear to include any specific amendments taking into consideration concerns raised by the Chamber of Commerce and Employer's Confederation's Coalition for Responsible Taxation in their letter to the prime minister and Ministry of Finance earlier this month regarding VAT.
Robert Myers, co-chair of the Coalition, which has been seeking to dialogue with the government on the basis for VAT and potential alternatives, said the legislation and regulations were an update to that which had been made available to the Coalition co-chairs by the government previously.
"We're reviewing it now," he said. "It helps that they have released it, it's very helpful, but our recent statement is still valid: we need the (financial/economic) modelling and the tariff schedule."
Meanwhile, Rick Lowe, operations manager for Nassau Motor Company, suggested that an example provided in the Guide to VAT released alongside the legislation and regulations by the government left more questions than answers as it included an assumption that excise tax would be reduced by 18.9 percent - not the roughly 17 percent previously suggested by the government.
Lowe said he is concerned that the government "keeps tweaking the numbers" and called for the release of the tariff schedule.
"The sample calculation provided by the government suggests there will be an 18.9 percent reduction in the Excise Tax and because no mark up is allowed on the VAT portion of the taxes paid at the port, this attempts to force a 13 percent reduction in a businesses mark up," Lowe said.
"Meanwhile, the government is projecting an increase in taxes taken of 21.05 percent. Businesses that fall under the Price Control Act will have no choice but to accept the reduction, unless these controls are removed, but that aside, adjustments will have to be made if profitability levels are to be maintained.
"You've got to maintain some level of gross margin and if they are automatically taking it away by the force of law, it only leaves other alternatives: delay renovations, don't give benefits, or if someone leaves you don't hire a replacement. Or do you in fact get to the point of lay offs? Heaven forbid it's bad enough in the economy."
The government has previously indicated that it intends to reduce import duties when VAT is implemented, in order to offset the inflationary impact of VAT on goods.
In the Guide to VAT provided, the government notes of its intentions with respect to import tariffs: "The Government plans to reduce tariff rates, as of July 1 2014, by an amount just sufficient to compensate for the introduction of VAT for nearly all most products that are now subject to a tariff rate above 15 percent. Tariff rates at or below 15 percent would be eliminated. The structure of the existing protections for domestic manufacturing and agricultural products would continue to be enjoyed. "With the rebalancing of tariffs to absorb the VAT, the prices paid for some goods by consumers after the introduction of VAT could remain unchanged."
Lowe has been a vocal critic of VAT.
Edison Sumner, president of the BCCEC and a member of the government's consultative committee on VAT, said that the release of the documents will enable the broader membership of the Chamber of Commerce to review it and provide feedback that the BCCEC can bring into its consultations with the government.
"The Chamber is still concerned that we don't have all the documents. We are glad the draft has been released and that it is now in the public domain so business people and consumers can be more informed going into this discussion, but we are still waiting on other documents and hopeful we will be seeing those soon. Once that happens we can review all in concert and put all the pieces together."
The government proposes to implement VAT on July 1, 2014, as part of a fiscal reform package intended to stabilize the government's fiscal position in the medium to long term.

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