The Ministry of Finance is considering an exemption "threshold" for the application of value-added tax (VAT) to residential consumers' energy bills of 500 kilowatt hours (kWh) per month, which in current terms would equate to all of those with a monthly electricity bill of $170 or less being exempt from paying VAT on that bill, Guardian Business has been informed.
Days after Ministry of Finance consultant Ishmael Lightbourne indicated to this newspaper that the government was looking at an exemption threshold of 200 kWh, in order to protect those lowest income individuals from seeing their energy costs rise under VAT, Financial Secretary John Rolle said that the ministry is looking at a higher threshold, which allows more customers to benefit from a VAT exemption on their bill.
Lightbourne had initially commented on the threshold, which he said was being discussed within the Ministry of Finance after it was revealed in the recently released VAT legislation and regulations that those documents propose a legal requirement that commercial and residential consumers pay VAT on their bills, but in the case of residential consumers, only if they exceed a certain amount of electricity consumption per month. That threshold was not contained in the document, which had a blank space in its place.
The consultant told Guardian Business that the government was "struggling" over the issue of applying VAT to Bahamas Electricity Corporation (BEC) bills, given an overriding concern to bring down the cost of electricity in this country.
However, Lightbourne said that the possibility of losing as much as $30 million in revenue if it exempted all BEC bills meant such an exemption may be "more generous than [the government] could afford".
A day later, Philip Brave Davis, deputy prime minister, suggested that the question of whether or not government adds a 15 percent VAT to BEC bills under the proposed tax regime, scheduled to come on stream in July 2014, is still an open question, with the government seeking input on the matter.
In an emailed statement to Guardian Business yesterday, Rolle again suggested that the government is looking at applying VAT to BEC bills, but disputed the exemption threshold initially quoted.
"Please let me correct the information which quotes the threshold for electricity at 200 kWh per month. The Ministry of Finance is working with a threshold of 500 kWh. In current terms, this would translate into an equivalent $170 per month in energy bills that are exempt, for qualifying households, or on an annual basis a bill of slightly more than $2,025.
"The exemption is, however, based on the amount of electricity used, so the dollar savings would increase if the electricity rates rise as is the case when the surcharge rises."
Businessman Ethric Bowe, president of Advanced Technical Enterprises and head of the Carmichael Road and Coconut Grove business leagues, who has become a vocal critic of the government's VAT implementation plans, yesterday said that to even discuss whether VAT will apply to BEC bills is to "accept VAT", something he is not willing to do.
"They are talking about VAT on electricity knowing its a critical input to business, but to talk about it is to say you have accepted VAT and we have differences there," he said. "The government is using a sleight of hand, talking about it as if it is a finished deal, trying to get into the details, whereas the VAT coalition, the business community, hasn't accepted it yet, so what you have is two groups at different points totally in this thing. To get into the details means you have accepted VAT."

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