The Coalition for Responsible Taxation has hailed the government's new VAT proposal as "progress", but said there is still much to do, calling the announcement that the tax will be implemented at 7.5 percent next year as just "the first leg of the relay".
Speaking with Guardian Business after the prime minister laid out the government's updated plans for tax reform, which include a lower rate than initially proposed, with "much fewer exemptions", Gowon Bowe, the coalition's co-chair, said: "Some people have asked, "Is it congratulations?"
"It would be immature to make it seem like there was a win or lose situation.
"The most important thing is the only winners in this will be the Bahamian society if we can protect the economy, employment and progression.
"Have we made progress from seven months ago? Yes. Have we achieved all we want to achieve? No. Is there a lot more to do? Yes. I don't see it as a victory, it's the first leg of the relay. Everyone who watches sports sees that pace picks up in the second leg. It's important to continue the momentum."
Bowe said that if the government is committed to debt reduction, implicit in the announcement of a 7.5 percent VAT rate would have to be a commitment to cutting expenditure by up to 10 percent over the next 10 years.
"It should mean a significant program of expenditure reduction in order to achieve the level of deficit reduction, so that's a positive," he said.
The coalition co-chair called the January 1, 2015 deadline announced by the prime minister in Parliament yesterday "still a tight timeline" that will require "considerable dedication" to achieve.
According to Bowe, recommendations the Coalition had made to the prime minister late last week, following the completion of the study on VAT and possible tax alternatives by their consultants, Oxford Economics, had not included a "hard and fast rate" for VAT.
"In short what we'd suggested were the key elements we thought need to be accompanied by tax reform. We highlighted the VAT scenarios and said there are trade offs. We told them that if the government is prepared to make commitments in terms of expenditure cuts, you could get as low as five percent, but that may not be feasible."

Exemptions
Bowe said he hopes that the government will move forward with virtually no exemptions, as recommended by New Zealand.
"We are pleased he has taken on board the element of reducing the exemptions. We would hope his term far fewer really means very limited exemptions because we want to see it play out as the least amount as possible, so that the compliance costs go way down."
With regard to the government's indication that it would not implement "wide scale" duty reductions when it brings in the tax, but may do so later on, Bowe said he views this as a "trade off".
"I can't say what financial analysis they've done for that but I think the intent of the government is that they want to see how the 7.5 percent will stack up in terms of the revenue it can generate before they immediately start reducing duties," he said.
"I think that (maintaining the current rates of duty) may be the trade off for a delayed implementation at a reduced rate, and we know the WTO obligations will by necessity reduce those eventually. In terms of our direct conversations with him what he said was that there'd be no reduction at this point and at the time that implementation was prepared to go live they'd see where they stood on WTO and VAT projected revenues. I would be surprised if he closed the door to say there'd be no duty reductions."
On the subject of duty rates, Christie said: "Being able to streamline exemptions and position the VAT rate much lower than in the White Paper, the government is not announcing any wide-scale reduction in import duties and excise taxes at this time.
"Based on the revenue performance of VAT early next year, the government may be in a position to consider tariff and excise reductions at the time of the 2015/16 Budget. More general tariff rebalancing, however, is still a requirement that will need to be implemented once the Bahamas concludes the ongoing WTO negotiations."

Cost of living to 'rise 7.5 percent'
On the impact of the newly-proposed VAT model, Super Value President Rupert Roberts said: "That means the cost of living will go up 7.5 percent."
The grocery retailer said that finding out exactly what will be exempted under the proposed model will be critical. In his address, Christie said the list will be released shortly.
"If it's not going to be like the New Zealand model, we will strongly object," said Roberts.
"We were hoping no exemptions exempts things like banking and rent, so we could have clean math, no dirty math."
Under the previously proposed form of VAT, the government suggested a wide ranging list of exemptions on breadbasket food items. Retailers were to be blocked from recouping VAT on expenses related to the sale of these items, increasing costs for grocery retailers and making VAT administration more complicated.
Roberts added: "It better [mean no exemptions on breadbasket items] or we have to pay $5-6 million and that's out of the question. That would be about a $12 or $15 million tax to me, with real property, business license and VAT and then if government is going to expropriate my profits, they may as well take my keys."
Referring to Christie's comments regarding duty reductions being delayed, Roberts said he was "afraid" of duty reductions all along, suggesting that given some level of proficiency in collecting this tax, to suddenly remove it to replace it with a new one would result in a major drop in revenue collections.
"They have learned how to collect some revenue through duty and I'm afraid if they take it off, The Bahamas will become 700 desolate islands off the Florida coast."

Lack of duty reduction a 'betrayal'
Meanwhile, another retail source, who spoke on condition of anonymity with Guardian Business, took a less positive view.
He said that a failure to reduce duty simultaneously with the implementation of VAT would be "a complete betrayal of any negotiation in good faith".
"The Coalition made it clear that duty reduction must be simultaneous and that fiscal reform must be part of the grand bargain," said the major retailer.
"The private sector will not accept VAT without a reduction in duty. The government is in for a serious fight now."
Rick Lowe, operations manager with Nassau Motor Company, and a major critic of the government's VAT plan, said it appeared the new proposal with fewer exemptions would make the tax easier to administer, however he was still largely against the tax.
He said that there were many outstanding questions, such as whether VAT will be charged to the car dealers "at the port" as well as by car dealers "to our clients".
Meanwhile, he said he was disappointed to not hear the prime minister make mention of any changes in price control, which force vendors to absorb any cost rises that would occur under VAT, or business license fees, which have risen significantly in the last year.
"They didn't mention price control, which is important, particularly for our industry. If you can add one percent [extra in profit margin] to your parts and cars you may be able to recover something, if not we're kinda nailed," said Lowe.
The car dealer said that under the new VAT proposal, initial calculations suggest that a car with a list price of $34,830 would increase in cost by $2,600, versus $1,600 under the previous proposal.
Laying out the path to yesterday's announcement on the government's chosen tax reform, Christie said that the government has deliberated on VAT for over a year and had extensive consultations with the private sector, as well as received advice and support from international organizations and experts from the U.S., New Zealand and the U.K.
"I therefore believe that we are now in a position to set out the policy framework for VAT that we believe will be successful from both a fiscal and economic growth and stability point of view," he added.
"That framework, which I believe addresses many of the concerns voiced by the public and the private sector, is set out in the VAT Bill that I will very soon be laying before the House of Assembly.
"We will work closely with the private sector going forward in elaborating and finalizing the various rules and guidelines that will be critical for successful VAT implementation."
Christie said that the government intends for the ministry of finance to be "at full administrative capacity and readiness" by October 1, 2014, several months ahead of VAT implementation.

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