VAT decision 'more important battle' than election

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January 03, 2014

The decision about what form tax reform should take is more significant for the future of The Bahamas than the results of any general election, a top businessman has argued, as he urged businesses nationwide to act in their own best interest by contributing to a $180,000 fund estimated to be needed by the Coalition for Responsible Taxation to conduct its own "VAT alternatives" economic analysis and public relations campaign.
Claiming that its "primary purpose is to prevent another recession", Dionisio D'Aguilar, a key fundraiser for the Coalition for Responsible Taxation, said that businesses should not "put their head in the sand" when it comes to VAT.
"It's their livelihood and it's our country and if we don't get this right and then they roll out this tax that will detrimentally hurt your business, you will have failed to deepen the discussion and protect your business.
"Every election politicians come cap in hand; well this is our call now... we need to protect ourselves to make sure everyone continues to survive in this economy. Every election a lot of people will tend to give a little to those campaigns, and this is an even more important battle," said D'Aguilar, a former BCCEC president, who is also the president of Superwash and chairman of AML Foods Limited.
His comments come as Robert Myers, co-chair of the coalition, issued a circular to members of the BCCEC and the wider business community yesterday, which gave the first official estimate of the cost of its planned public relations campaign and economic modelling efforts, designed to test the viability of VAT and other tax alternatives to meet the revenue-raising objectives of the government without negatively affecting the economy.
Sharing several posters that demonstrate the potential rise in the cost of living for the average consumer under VAT and calling for more people to become involved, Myers said: "The Bahamas Chamber of Commerce's Coalition for Responsible Taxation invites you to share the attached informational flyers and web link below with your staff and consumers.
"It is the coalition's objective to educate consumers to the fact that VAT is a consumer tax and not a business tax as much as the public might believe. The message and call to action are clear, we must demand the facts, demand delay and demand an alternative option to VAT prior to its implementation by the government. The coalition is not against additional taxes but wishes to ensure that taxes are not put in place at the peril of the economy."
D'Aguilar said his sense is that businesses are "fairly motivated" to contribute to the coalition's coffers in order to fund its efforts to cause the government to look at other alternatives to VAT, as it seeks to plug the fiscal deficit and turn around the national debt trajectory.
"I think the government has won the argument that we need to raise revenues; everyone recognizes we need to raise revenues and cut expenditure, so then the question is what should we do to raise revenues? The government has received international advice that VAT is way to go, but it has failed to convince the business community that this is going to help rather than hurt the economy, and there is not one example in the Caribbean where the introduction of VAT has not devastated those economies in which it was introduced; there is lots of evidence to show it hasn't helped; you can't tax your way out of recession.
"The evidence is not good so why do we blindly go down this path? We recognize we have to raise money but you don't want to introduce a burdensome mechanism that ends up destroying the economy," said D'Aguilar.
The ever-more expansive and organized mobilization of the coalition and its campaign, now highlighted on a new website - - which calls on the public to "demand the facts, demand a delay and demand alternatives", points to the increasingly
uphill battle that the government will have in convincing the population that VAT is the right way to go in order to fix the country's fiscal woes.
The coalition is not the only civic group suggesting VAT may not be the way to go. Citizens for a Better Bahamas, headed by Tamara Van Breugel, is also gaining momentum, promising to "go grassroots" in 2014.
The government recently hired a local public relations firm to launch its own VAT PR campaign, but this has yet to kick into high gear, and since mid-November there have been just a couple of public education events on VAT organized by the Ministry of Finance.
D'Aguilar said the coalition's efforts are motivated by a lack of confidence that the government has provided the necessary evidence that VAT is the "right tax" for The Bahamas.
"It's all based on the fact the government hasn't done what it needs to do to convince us this will help, not hurt this economy. We've been galvanized to say stop... let's make sure this is the right decision."
While D'Aguilar and others involved with the coalition have indicated that they have been pleased to see officials responding receptively to their desire to be involved in the decision-making process on the way forward, it remains unclear how the government will ultimately choose to factor in their findings and the public opinion on VAT into its policy-making process.
If the government is to implement VAT on schedule by July 1 of this year, it will need to have in place numerous elements of the new administration system ahead of time, and likely by a period which could potentially pre-date the release of any recommendations that the coalition reaches on other potentially viable tax alternatives.
To date, officials have resisted committing to any delay in the implementation in order to consider other potential options, and have received impetus to put the tax in place by the pre-announced date from international entities that are watching The Bahamas' fiscal position such as the International Monetary Fund and the credit rating agency, Standard and Poor's.
While commending the government for being "brave enough" to address the critically important deficit and debt challenge, D'Aguilar said his fear is that VAT will reduce economic activity, through rising prices, leaving consumers and the government worse off.
Noting that one challenge in the fundraising process may be the belief on the part of businesses that the government will "go ahead with VAT anyway", notwithstanding any analysis and campaign on their behalf, D'Aguilar said he believes that even if VAT does get implemented the public discussion the coalition is driving will lead to important "tweaks" in the legislation and tax regime that could minimize its negative impact on the economy.
"Initially the government wasn't interested in even entertaining that idea; it was VAT or nothing. Now the coalition has started the discussion. Now they're thinking 'lets look a little bit harder, people are asking intelligent questions, now we have to dig a little deeper'. We are not a bunch of stupid people who are going to follow a government which has run up an incredible debt. We're going to determine what is best for the Bahamian economy."

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News date : 01/03/2014    Category : Business, Nassau Guardian Stories

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