Top manufactures in the country are sounding off on the possible impact of value-added tax (VAT) on cash flow. According to the government White Paper, manufacturers importing raw materials into the country must pay a 15 percent VAT off the top. While industry leaders understand the need for the tax, concern is being raised on their inability to recoup this cost until the final point of sale. Carrying an additional 15 percent burden for a month, or perhaps longer, could have a major impact on local businesses. "I am not sure I understand the logic behind that," said Walter Wells, president and CEO of Caribbean Bottling Company (Bahamas). "For an importer with raw materials, that is not an issue. I'm not buying it locally.

So I'm not sure what the urgency is to pay on an imported raw material when I haven't manufactured it or sold it." Acknowledging that "something must be done" by government to generate more revenue, Wells told Guardian Business that the white paper could use some tweaking before VAT comes into force next summer. "It has potential to impact cash flow," he said. The manufacturer felt that VAT would impact businesses in various ways. While smaller businesses might be even more affected, large firms have bigger overheads to deal with. Most companies with large clients end up carrying receivables for 45 days or longer, making another 15 percent burden even more difficult.

Geoff Knowles, the operations manager at Aquapure, agreed that the 15 percent on imports is a point of contention among Bahamians. He called VAT, under its present form, "very complicated and confusing". If it wasn't for the duty reduction on raw materials, "it would be hell right now," he said. The rising cost of doing business, such as electricity, makes getting VAT right the first time all the more important. Larry Phillips, the owner of Phillips Sailmakers & Awning Manufacturers, told Guardian Business he has an open mind to VAT. But like Knowles, he eagerly awaits a clearer definition. "There is a sense in this country that if you own a business, you must be rich.

That's absolutely not true. Most of my employees - and I am sure I am not alone - drive far newer cars than I do, take more vacations, go to Florida more frequently," he said. "This is not a complain, just a statement of fact." Phillips told Guardian Business that the discussion is incredibly important, with the mind-set that business is already very expensive in The Bahamas. Every day is a challenge, and every payday is a challenge, he said. For his part, Wells suggested that the government should consider tying in payments of VAT in normal business cycles. For example, businesses could pay the VAT after 45 days, which tends to be the timeframe when a product is sold.

Either way, he felt that businesses would have to evolve and have an "understanding banker". Businesses will likely have to consider higher overdrafts to carry the 15 percent for a few weeks. "It's a buffer until the dust settles," he said. "It will impact everyone differently on the cash end."

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