The Inter-American Development Bank (IDB) model pointed to by the government which justifies the implementation of value-added tax (VAT) is "historical and not forward looking", according to Robert Myers, co-chair of the Coalition for Responsible Taxation.
Myers said it is not yet clear if the coalition can use the model to test its own alternative tax proposals or will have to create its own economic model before presenting its "VAT alternatives" to the government.
"We need it to be a forecasting model, not a historical model," said Myers.
It will not be until the end of January, after a series of seminars on how to use the model, that the coalition will be given access to the model to see if it can utilize it to test the viability of other possible alternatives to VAT.
If it cannot, a new model will have to be created from scratch, which could take "between eight to 10 weeks," suggested Myers.
If this timeline is accurate, this would mean final proposals might not be forthcoming from the coalition on realistic VAT alternatives until around the end of March, or the beginning of April 2014.
The government is currently moving ahead with plans to implement VAT on July 1, 2014. It has made it known that it is forging ahead with the purchasing of software and hiring of staff to advance the implementation of the new tax regime.
Based on consultations with its membership, which includes more than 20 major industry associations in The Bahamas representing some 700 businesses and 60,000 employees, the coalition has put together a slew of potential alternatives to VAT, which it is concerned could derail economic activity, negatively impacting many businesses and consumers even as it might raise additional revenue for the government.
But Myers has been careful to state that none of the proposed alternatives should be considered "final" until the coalition has had a chance to do what it is calling for the government to do - undertake comprehensive forecasting of the effects of these tax proposals and other economic/fiscal reforms on overall economic growth, debt levels, consumer demand and more.
He and the coalition had hoped that when the government released its economic model it would not only get more answers about this impact, but also be able to use the model to enter its own data and investigate the potential for other alternatives to VAT to present to the government.
Earlier this month the government released the IDB study which it said shows that the introduction of VAT on July 1, 2014 would have "positive economic and fiscal benefits".
The model was described as a "highly technical research, fully calibrated to the local circumstances and based on a complete representation of the Bahamian economy".
Members of the coalition, along with staff from The College of The Bahamas, the central bank, the Department of Statistics and the Ministry of Finance attended a teleconference with the author of the IDB model earlier this month.
Myers said the model appears to be "VAT-centric" but the coalition will "try to work with it".
"We'll work with them and then we'll continue to try to manipulate their model," he said. "They've said they'd allow us to use it, we'll take that on face value and hope we can start to manipulate that and start working on those scenarios."
He added that he is concerned that the present model "takes the numbers which have been produced historically and applies the VAT rate to see what would have happened" and may not be as "forward-looking" or take into consideration as many variables as the coalition would like.
"It doesn't take into consideration any market sentiment, perceived change in unemployment numbers or any of these other things that can affect the outcome," he said.
"There's nothing wrong with that but that's not what we've been told is the most suitable method. We want dynamic economic modelling; you've got to take into consideration market sentiment and economic conditions. We are looking to see what VAT will do in the future, not what it would have done in the past and that involves a lot more work."
He added that the coalition will soon send a list of data it needs to complete its simulations to the government, in the hope it will supply them with the information.
Former National Insurance Board actuary, Derek Osborne, economics director for the coalition, who attended the IDB teleconference on the model, told Guardian Business: "It's a general equilibrium model demonstrating what the economy would look like and government debt if VAT had been in place in the last 10 years."
He said the coalition is still "waiting to see" the model in its entirety, and until then it is "hard to say" at this point if the grouping will need to create its own model or will be able to use the IDB model for its purposes.
Osborne, along with other economists yet to be identified by the coalition, are expected to undertake much of its "number crunching" ahead of the final submission of VAT "alternatives" to the government.
He said he agrees the government must collect more revenue, but he is not reassured that VAT is the best alternative.
The government has been meeting with representatives of the coalition over the past six weeks.
The coalition is seeking a commitment from the government that it would consider a postponement to the implementation of VAT in order to allow it more time to prepare and consider alternatives.
The government has given no commitment to alter its plans to implement VAT on July 1, 2014 to date, but the prime minister has indicated that the date is not set in stone.

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