Downtown merchants yesterday expressed great concern over the implications of value added tax for the competitiveness of their products, as the Downtown Nassau Partnership revealed that a study has been commissioned to determine the potential impact of VAT on this sector which to a large extent relies on its "duty free" status for profitability.
Guardian Business understands some of the larger retailers may be proposing the creation of a "tourist zone" downtown that would not

be subject to VAT in the hope of avoiding the completiveness-reducing implications of VAT on the products they sell primarily to cruise ship visitors who have the choice of buying in other ports, or back at home.
While recognizing that it is not clear precisely how the sector will be treated under the forthcoming VAT regime, luxury and other duty free retailers downtown yesterday suggested dire consequences for downtown from the imposition of VAT, both on the cost of items sold, and costs to businesses, who will see VAT added to their already costly commercial leases in the downtown area.
At the Perfume Shop, Marsha, who declined to offer her surname, said that she sees the potential for VAT to "absolutely make us less competitive" in the eyes of visitors.
"It's just one more thing that they're going to put on our backs that will affect the downtown area again. If their intention is to destroy downtown this is a good way to go about it."
Noting that buyers are already extremely price conscious, Marsha said she anticipates the potential for VAT to wipe out any edge The Bahamas may have on items such as perfume.
"Right now there's a very small margin between US prices and our prices. They have their iphones in here all the time and if Macy's has something for $82 and I can only offer it for $79, they're not going to buy it to carry it around."
Meanwhile, another downtown merchant who declined to be named, said they also believe VAT would make their jewelry and watches unattractive to purchasers.
"First of all I have to say it's been very unclear what would happen, but if I were to assume 15 percent would be placed on top of prices we have now, I think we would become extremely uncompetitive.
"The reason we are so popular in terms of other cruise ports is that we can claim we are 'duty free', and have no tax like some of our neighbors. We know in Aruba where the tax is extremely low in terms of duty they do tremendously well.
"When you go up in terms of VAT and other taxes we see where it is a challenge, and I know for sure that we would have a challenge. It would adversely impact this business, to say the least."
Gevon Moss, Executive Administrator at the Downtown Nassau Partnership, told Guardian Business that a small group of downtown luxury retailers have come together to commission a study by Deloitte on the potential impact of VAT on their businesses.
"It's going to look at how we effectively work around VAT and 'duty free' and how it will all come together. It will address what has happened in other jurisdictions with duty free products when VAT was implemented," said Moss.
Yesterday one of the major downtown merchants, John Bull, declined to comment on VAT's potential to challenge the sector, as Inga Bowleg, the company's director of business development said not enough was known.
Another major downtown luxury retailer with whom Guardian Business spoke expressed a similar sentiment, adding: "The whole problem is no one knows anything, and businesses want to know."
He went on to note that besides the effect of VAT on competitiveness of luxury goods in the eyes of visitors, concern may also be warranted with respect to the impact of VAT on Bahamian's demand for these items, noting that around "fifty percent" of such retailers' market is Bahamian.
"After you go to your hairdresser in nine months and they tack 15 percent, and you go somewhere else and they tack on 15 percent, are you going to have a bit of change in your wallet to go and buy another pair of shoes? We depend on local customers too."

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