The Bahamas Federation of Retailers (BFR) has objected strenuously to the characterization of the tremendous costs of preparation for business operations in a value-added tax (VAT) environment -- specifically repricing goods to include VAT -- as "a one-off cost," and some retailers have lashed out at the man who made the statement.
The government has hired Don Brash, a former New Zealand politician and one-time governor of the Reserve Bank of New Zealand, as a consultant on the implementation of the VAT. Brash told Guardian Business recently that the cost of repricing goods is "a one-off cost" and "no big deal". He was speaking in the context of the government's planned transitional period for large retailers providing VAT-inclusive pricing, which is expected to last until February.
The BFR doesn't think it is a "one-off cost" and, in a press statement issued yesterday, said the matter is "a very big deal indeed".
"This really is an insult for an outsider with no retail experience to tell us that it's not a 'big deal'. Not one retailer wants VAT-inclusive pricing and the trend with all of the VAT consultants has been that they are unaware of the retail environment of The Bahamas where we are in direct competition with U.S. retailers and handicapped by price control and high import duties," one retailer said.
"Once they become aware of that fact, they tend to change their tune. For the government to maximize revenue, local retailers must be competitive with online and US prices and only exclusive pricing can achieve that."
The federation pointed out the international context in which Bahamian businesses are being told that they have to include VAT in the price at 7.5 percent: in Florida and the wider US market and Canada -- the country's primary tourist markets -- the Sales Tax or GST, respectively, are not built into the prices, so the shelf prices appear to be lower to the consumer as a result.
"There are so many good reasons to go exclusive pricing that it is an absolute mystery why the government just doesn't do it. It was their original position after all. The retailers want it, the grocers want it, the car dealers want it. Everyone that understands business wants exclusive pricing and the government gets their money whether they go inclusive or exclusive so why not work with us? It's such a simple fix," the retailers said.
The BFR argued that Bahamian retailers are constantly forced into a less competitive sales position by their own government, both under the old duty regime and, under a VAT-inclusive pricing regime.
"Our economy 'bleeds' hundreds of millions of dollars to Florida every year and none of that 'bleed' is taxed by government," the BFR said, suggesting that Brash, being from New Zealand, might not fully appreciate this simple reality.
"Pricing the entire country 7.5 percent higher on the shelf when the USA and Canada only add their taxes to the transaction after the fact and on-line shopping is mostly sales tax free makes a massive difference to our perceived competitiveness as a shopping destination," the BFR said.
"If Mr. Brash understood how much money this country is losing to Florida because of a poorly thought through tax policy, he would understand this simple reality and he would not be so glib about VAT being a 'one off cost'."
The retailers' group also pointed out that the government loses revenue when consumers opt to buy in Florida, in other parts of the United States, or online, instead of shopping locally.
"It is far easier for the government to collect revenue on a container of goods brought in by a business than it is for them to collect revenue from an individual's personal suit case," the BFR said. "The inability of government to comprehend this simple reality is really quite shocking and the Bahamas Federation of Retailers will not stop trying to bring this important and obvious truth to the wider public so that they too can ask for exclusive pricing."

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