August 30, 2013
A leading businessman yesterday called for the government to "come clean" on what adjustments will or will not be made to import duties at the time when value-added tax (VAT) comes into effect, accusing the administration of being "dodgy and cagey" over the issue.
Suggesting that the introduction of VAT may totally offset the beneficial economic impact of Baha Mar coming on stream, Superwash President Dionisio D'Aguilar told Guardian Business the least the government could do is allow businesses to be as fully informed about the process as possible.
"They're being so fuzzy and confusing and muddled," he said.
D'Aguilar proposed that even if the government is unable to provide specific information regarding which line items will be reduced and by how much, it should at the very least be in a position to provide an insight into what the average rate of duty will be post VAT-implementation.
"Just tell us what most items are going to be at - you can get specific later. What is going to be the general rate?"
The businessman suggested he fears that concerns about reduced revenue will cause the government to only minimally reduce import duties prior to the introduction of VAT.
The level to which current duty rates will be lowered is a topic of considerable concern for business people as the government moves ahead with its VAT implementation schedule.
In response to questions raised about the likelihood of price rises as a result of the implementation of VAT at town hall meetings and in other fora, the government has repeatedly stressed the plan to reduce import tariffs as a key component offsetting the impact of VAT on prices by reducing initial input costs.
At the end of July, Minister of State for Finance Michael Halkitis suggested that the government would be in a position to provide details on which tariff lines would be reduced and by how much by the end of August. With just a day left to go in the month, the government has yet to provide this information, and has yet to indicate when it will do so.
In an interview with Guardian Business on the issue of tariff reductions in late July, Financial Secretary in the Ministry of Finance John Rolle initially suggested the release of details on tariff reductions would have to be coordinated with the committee arranging The Bahamas' WTO accession so as to avoid any conflicts with the position being put forward by that group to the global trade organization.
However, he then corrected himself to state that an announcement on tariff reductions may need to precede the WTO accession process and should be made "very soon".
D'Aguilar, who has been an outspoken critic of the uncertain environment created for businesses by the handling of the government's plans to introduce new revenue measures, said that ultimately he anticipates that businesses need to prepare themselves for a "cataclysmic" event come July 1, 2014.
"Every business should brace and prepare themselves," he said of the VAT implementation date.
"There's no doubt about it, when they introduce VAT, the economy will get worse. The only thing might balance it out is the launching of Baha Mar, but I'm beginning to think that whatever benefit Baha Mar may have in creating additional employment will probably be set back by businesses having to retrench due to the inflationary effect of VAT. Everything will go up except payroll; I don't care what politicians or central bankers say.
"Businesses will immediately feel that pull back from the spending public."
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