A BISX-listed company has become possibly the first major enterprise in The Bahamas to come out and publicly express that it is "not concerned" about having to administer value-added tax (VAT) - so long as it is implemented in a way that makes it simple to do so.
Gavin Watchorn, CEO of AML Foods, also revealed that in addition to asking the government to abandon plans to exempt a laundry list of breadbasket food items from VAT, the Retail Grocers Association has also called on the government to instead have a lower rate of VAT on food items, as he said was the case in Ireland, where he used to work.
In the wake of much public discussion over the recommendations from visiting New Zealand-based VAT specialists Don Brash and John Shewan, Watchorn said: "The message that the consultants from New Zealand are stating is the very same advice that the Retail Grocers Association gave the government for free: have no exemptions and a lower vat rate. We showed them that it would be revenue positive."
Watchorn, who spent the first six months of his professional career in the VAT department of an accounting firm in Ireland, said that he thinks there has been some "overkill" in terms of concerns over the administration of VAT.
"A simple VAT process is relatively simply to administrate. So speaking for AML Foods, we're not concerned at all about having to administer VAT; we're very much ready for it when it comes."
Brash and Shewan promoted New Zealand's "few exemptions, lower rate" VAT regime while in The Bahamas, suggesting that the model is "simple and efficient" due to its low compliance costs and complications. They said that by spreading the tax across a broader base of goods and services, a lower rate could be applied generally and the impact on low-income families would be mitigated through targeted social welfare payments. They recommended the model to the government in a report concluded earlier this week.
Watchorn said that the Retail Grocers Association suggested a similar model earlier, but went further by proposing a lower rate of VAT for food items in particular, adding that administering VAT with different rates on certain items is still easier and less costly than administering it with certain items being exempted.
"If you have a system with multiple exemptions it does make it very difficult. Speaking from my own experience in Ireland, where there's little to no exemptions, if they want to protect the lower income people in society what many countries do is have a lower rate. It's much easier to have a lower rate than to have exemptions.
"The issue with exemptions for us is very simple. While on the one hand they wish to protect lower income groups in society and the government should be trying to do that, if a business owner can only reclaim 20 percent of the expenses he has to recover that, or his business scenario has fundamentally changed, in which case the cost of other items that are not price controlled are going to go up (to compensate for the cost increase). If your electricity bill goes up 7.5 percent - or whatever the rate of VAT is, overnight, business owners can't absorb that. The only fluid cost you can cut is payroll, or you're facing closure.
"Having no exemptions and a lower rate is a revenue positive for government, and businesses get to reclaim all of their costs, which I think is only fundamentally fair anyway," he said.
Watchorn noted that price-controlled items have gone from about 11 percent to 15 percent of AML Food's business in the last year.
Click here to read more at The Nassau Guardian
