Ms. Marla Dukharan, Group Economist RBC Caribbean spoke on; The Commonwealth of The Bahamas: From Tax Neutrality to Fiscal Sustainability.
Mr. Wayne Lovell, Partner, Tax, KPMG Barbados discussed; Value Added Tax - Operational Accounting and Financial Implications, and
Mr. John Rolle, Financial Secretary, Bahamas Ministry of Finance presented on; Value Added Tax - Fiscal Reform In A Modern Bahamas.
Here's my takeaways;
From Ms. Dukhara:
1. Our Primary Fiscal Deficit is the problem. (Read government spending)
2. FDI is down 28% in 2013.
3. Foreign Reserves of US dollars provide a 7 week cover. The lowest in the Caribbean.
4. 40% of the working population in the Caribbean Market are employed in the "informal sector".
5. VAT takes 2 to 3 years to be revenue positive.
6. There will be pain and discomfort as tax reform is always painful and this will be worse for The Bahamas.
7. Implications for business include having: Proper billing systems, Accounting records, Completing VAT returns, Being subject to periodic audits by the Government and Training.
8. Revenue and Expenditure measures are necessary to correct fiscal imbalances.
9. Failure to return to fiscal sustainability will result in default/restructuring and this will be far more painful.
From Mr. Lovell;
Important to have three new accounts to track VAT. VAT Payable, VAT Receivable and VAT Çlearing.
He provided lots of insight into what might be be necessary for a business to implement.
From Mr. Rolle;
1. Reforms will be revenue positive from day one.
2. Delusional to cut government expenditures.
3. Concessions exceed $200 million annually.
My three questions for the panel:
Q. What price inflation is expected for the consumer?
A. They have a number but not willing to share it yet.
Q. Part One: Considering VAT will be added at the port to compensate for Customs excise tax/duty reductions how will that reduce prices when VAT will be charged on the final sale?
Part Two: How will businesses on Price Control increase mark ups to pay for increased cost of doing business as a result of VAT?
A. Part One was not answered as I confused this by asking about the effect of Price Controls.
Part Two: It was suggested that something might have to be worked out for goods on price control.
Q. If fiscal deficits continue throughout the region why will adding a VAT solve our fiscal problems when they have VAT, personal income tax, business income tax, consumption taxes, excise duties and more?
A. Other issues affect the deficits in the region.
In the final, it appears that every public presentation creates more confusion and angst among the private sector as no new information is shared or allowed to be shared.
This puts John Rolle, the Financial Secretary in an awkward position as he cannot provide concrete answers.
He did agree that there needs to be a very serious discussion about government spending and what to do about it.
Finally, it behooves the government, Mr. Rolle included, to be honest about costs to the private sector, the consumer and other issues they are not being frank about.
What's your take?