Views and commentaries on the proposed value-added tax (VAT) system in The Bahamas

The fiscal reform series: About that VAT

The views and commentaries on the proposed value-added tax (VAT) system have been as diverse as they have been inconsistent. What makes the discussion even more interesting is that the divergent opinions have come from economists, experts in this form of taxation and industry leaders.

There is often the tendency for facts to either be lost or manipulated in a prolonged debate, with the loudest or most frequent message being perceived as the ultimate truth. It is therefore important that we filter out the proverbial noise in the market and unravel the actual facts that will enable us to develop our own opinions on the proposed VAT framework. In this article we briefly consider the various utterances made by both local and foreign individuals as they chimed in on the ongoing debate on VAT in The Bahamas. We will subsequently embark on the tasking journey of understanding VAT and what it means for the average Bahamian.

The Barbados experience

It was reported a number of weeks ago that the Governor of the Central Bank of Barbados, Dr. Delisle Worrell, had indicated that VAT is an anti-tourism tax and had hurt that country’s local industry. Worrell was also reported as stating that the tax is very complicated and suggested his preference for a simple sales tax. We will examine sales tax as an alternative later.

A few days after the aforesaid report on the comments of Worrell, The Nassau Guardian quoted Lalu Vaswani, president of the Barbados Chamber of Commerce and Industry (BCCI), as saying that VAT has been good for the economy of and businesses in Barbados. Vaswani noted the level of concern and anxiety within Barbados prior to the implementation of VAT; an experience that seems similar to the current pre-VAT environment in The Bahamas. Of particular note was his reference to an adage that a rope in a dark room feels like a snake. More recently, Mark Shorey – a VAT expert out of Barbados with about 20 years experience in VAT consultancy and a member of the VAT implementation unit – weighed in on the VAT debate in The Bahamas. Shorey remarked that anti-VAT hoteliers will not be satisfied and indicated that training closer to implementation may be more effective. In the end, Shorey suggested, the implementation of VAT in Barbados was successful and is a model that could help The Bahamas.

Chronicles of the local commentaries

Comments attributed to past and present government officials with responsibility within the Ministry of Finance have been consistent insofar as they relate to the urgent need to address our fiscal imbalance. These individuals have also been backed by some locally respected professionals who have cautioned that we are between a rock and a hard place with the window for remediation closing with each passing day. A common concern has been the rate at which VAT is introduced, with recommendations for a rate lower than the proposed 15 percent.

The main opponents of VAT from the business community have been fervent in their campaign against this form of taxation, arguing that it is not appropriate for The Bahamas and would increase the cost of living while further shrinking the middle class. A study of jurisdictions that have implemented VAT will show that the fear and anxiety being expressed is not unique to The Bahamas, nor is it unusual for various interest groups to voice their concerns. The emergence of groups that purportedly represent the populace and average citizens has also inserted a unique dimension to the ongoing debate on VAT.

WTO accession and a replacement tax

We know that the government requires among other measures on the expenditure side, additional revenue to correct our structural recurrent deficit. However, the recent revelation by the co-chair of the Coalition for Responsible Taxation that the group was not aware that the reduction in tariff rates has to be immediate and cannot be phased in as The Bahamas seeks to join the WTO is indeed food for thought. This raises the question of how effective the government has been in explaining the link between our efforts to join the WTO and the introduction of VAT.

It appears that the case for our urgent accession to the WTO has not been adequately presented to the average Bahamian. It can also be argued that not enough has been said to sensitize the public to the fact that VAT is intended to replace the significant amount of revenue the government will be forfeiting as tariff rates are reduced to facilitate our accession to the WTO. Perhaps this is an indication of the oft manifested culture of addressing matters in vacuums or isolation without due attention to the bigger picture. It follows therefore that if VAT on goods is expected to replace existing tariffs on goods, the introduction of VAT should be neutral in relation to government revenue. This will not however be the case as the government expects to raise some $200 million in additional revenue from VAT on services which have been untaxed for quite some time even though our economy is for the most part service based.

The progressive aspect of a regressive tax

There is no doubt that VAT cannot be classified as a progressive form of taxation and is generally regarded as a regressive tax. In this regard, there have been numerous criticisms of this proposed tax system and suggestions for alternatives which are deemed to be more progressive in nature, including income tax.

Warren Buffett – the man often referred to as the Oracle of Omaha and regarded as one of the greatest investors of all time – has been a proponent of the rich paying more taxes in support of the philosophy of U.S. President Barack Obama. Locally, businessman Tennyson Wells has been quoted as stating a similar view, albeit from the perspective of a different school of thought on welfare, allocation of the tax burden and the trickle down paradigm. Nevertheless, as research has shown that individuals who are more well off spend a higher percentage of their income on services than goods when compared to the less well off, one can conclude that the introduction of VAT will increase the amount of taxes paid by the upper class in our country over that paid by the lower class. It should be noted that this does not eliminate the expected increase in the cost of doing business for companies, though this will ultimately be borne by the consumer.

VAT versus sales tax

The complicated nature of a VAT system has been a major component of the concerns raised by the private sector with preference for a sales tax being expressed. The government had documented its rationale for proposing VAT as opposed to other forms of taxation in the white paper released in February 2013. While the paper did not provide ample details on the analysis conducted on each type of tax prior to the selection of VAT, the superiority of VAT over sales tax in terms of enforcement mechanisms is apparent.

It is therefore understandable why the government would prefer VAT over a simple sales tax. It is a known fact and Shorey confirmed that VAT has inbuilt self-policing and compliance features which reduce the level of resources that the government will have to allocate to its compliance efforts. In effect, VAT creates a level of accountability, responsibility and transparency that makes registrants and in some cases consumers, agents of the Central Revenue Agency with significant incentives and penalties ensuring that the government receives VAT payments. On the other side, it is expected that businesses will prefer a sales tax system which is easy to administer because it requires the collection of taxes at the point of sale instead of throughout the production/value chain as required in a VAT regime.

Conclusion

The German-born American artist Hans Hofmann famously stated that "the ability to simplify means to eliminate the unnecessary so that the necessary may speak". It is time to rid ourselves of the unnecessary commentary in the VAT debate and focus on the facts necessary to move the discussion on fiscal and tax reform forward. Only then can a constructive discussion about the VAT that has become associated with fear and uncertainty, as well as proposals for viable alternatives, begin. Next week we will take a deeper dive into the features of VAT and the contents of the draft VAT Bill and regulations. In the interim, the various stakeholders need to disclose all the relevant details and simplify the information necessary for all to comprehend.

• Arinthia S. Komolafe is an attorney-at-law. Comments on this article can be directed to a.s.komolafe510@gmail.com.

April 01, 2014

thenassauguardian.com

The agony of abused Bahamian women in The Bahamas and Leslie Miller's domestic violence revelations

My daughter’s lesson on domestic violence

Every morning, on the way to school, my eldest daughter’s job is to read the newspaper’s headlines or top stories to me as I drive.

She always waits for my reaction to the news before moving to the next story. So it was when Leslie Miller made headlines with his offensive, tasteless and very harmful story told as a joke on the floor of Parliament. The first day my reaction was a “suck teet”. She did not react and we moved on to other news stories.

As the matter captured headlines for many days, I noticed that she continued to watch for my reaction. Still, and notwithstanding the anger boiling up in me, I made no comment.

By the time we got to the newspaper headline about the $1,000 check donation Miller presented to and which was refused by the Crisis Centre, I had reached my limit and made my displeasure known with a few choice words. I told her that Leslie Miller was a poor example of a member of Parliament. I told her that his behavior in telling the story about abusing a woman was wrong, demeaning to women and inexcusable.

Then came the million-dollar question: “Mummy why are you so angry if he said sorry?”

I had to determine how I was going to explain to an eight-year-old that when someone does something so bad, such as bragging about committing acts of domestic violence, “sorry” simply doesn’t cut it.

I wondered how best to impart that fact to her. I told her that unfortunately some women somewhere in our country are abused every day by their boyfriends and or husbands. I told her that often their abusers say “sorry” but then abuse them again. Sometimes, I told her abusers come home with flowers and candy or with gifts of jewelry or cloths. Many mouth poetic apologies and give promises to never again commit those disgraceful acts of aggression and hurt. And I told her that sometimes, in those terrible circumstances, sorry is not enough; gifts don’t mean anything and women must learn to protect themselves. I explained to her that in life she would learn that not every apology was genuine and that every apology did not have to be accepted.

As most trusting children do, she accepted what her mother told her and moved on.

I, on the other hand, began to really think about the lesson I was teaching her. As a mother, was I teaching my daughter that domestic violence is a joking matter? Was my original silence on this important issue tacit consent? Was I silently condoning what was most likely one of the more despicable commentaries ever uttered in the House of Assembly, where supposed honorable men and women gather to represent the interests of all Bahamians at the highest level in our society?

At that moment I determined, rightly or wrongly, that I would wait until I spoke in the Senate to express my disappointment in the member of Parliament for Tall Pines and to express my support for the great work being done by the Crisis Centre, and organizations like “Holla Back”, which seek to raise our consciences about the problem of abused women in The Bahamas, helping to create safe spaces for those persons escaping abuse.

I did not want any statement made by me to be interpreted as scoring political points and so I intended to reserve comment for the upper chamber. Unfortunately, the opportunity to discuss this very important matter in the Senate has not presented itself and I feel compelled to make my views on this subject public.

The messages we send

I believe that we have to be very careful about the messages we send to our young people by what we say and what we do in our lives.

We cannot tell them that abuse is a joking matter whether it is abuse of a woman by a man, of a child whether male or female by a woman or a man; indeed, abuse of one man by another man is not acceptable.

We cannot, and must not, tell the next generation that it is acceptable to brag about or to joke about or make light about beating down another human being, much less accept our men telling tales and joking about abusing a woman.

Such acts of abuse cannot go without a strong, strict rebuke.

I did not speak up right away. For that I apologize to my children and to every woman, man or child who has suffered abuse in our Bahamas.

Shamefully, others seated in both chambers of our Parliament also failed to speak up including our prime minister, the leader of our country and the leader of Miller’s political party.

As a young Bahamian woman, I thought it was important that we hear from Prime Minister Perry Christie on this matter. I thought this was especially important since he, when given the opportunity in 2002 to stand up for equality for women, voted first in support of constitutional amendments meant to remove the last forms of official discrimination against women from our constitution, but then came out of the House of Assembly and spearheaded the Vote No campaign to kill the amendment.

After successfully derailing the first opportunity for women to attain equality under our independent constitution in 2002, Christie promised that if elected to office he would bring back the same constitutional referendum concerning equality for women. He won an election in 2002 but that constitutional referendum never came back and Bahamian women continue to be discriminated against in our constitution.

Since returning to office again in 2012, Christie’s government has not found it convenient to bring the constitutional referendum to remove gender discrimination from our constitution.

Recently, Christie’s government made much ado about the 50th anniversary of the Bahamas’ women’s suffrage movement. At that time, he again promised to bring forward a constitutional referendum on women's rights; the same promise he made over 12 years ago.

We continue to wait; while the government finds the time for a referendum on numbers and gambling; while legislation is drafted and redrafted to accommodate stem cell research, always taking care of “da boys” out in front while Bahamian women continue to wait.

While I cry shame on the prime minister on his deafening silence on this critically important issue for women in our country, I express even more surprise that the usually vociferous (I would even dare say pit bull like) women of the PLP appear to have allowed the bite of a self-styled “political potcake” to get the better of them.

Shamefully these PLP women called a press conference to condemn and ridicule the member of Parliament for Long Island, Loretta Butler-Turner, for her stand against the abuse of women and the actions of Miller in trivializing this terrible issue that traumatizes far too many women in our country.

In fact, at that press conference the PLP female spokespersons said that no woman in public life who is a mother should be making those political statements. Well I say that no woman in public life should remain silent while a male MP brags and jokes about domestic violence, others squawk and cackle and others just remain silent.

Standing up for women

I want to teach my daughters a few valuable lessons about respect for the dignity of all human beings.

I call upon the leaders of this nation to help me to teach this lesson, not only to my children but to all the children of our country. Sometimes “sorry” is just not enough. Sometimes a monetary gift cannot erase the damage.

I call on the PM, my own leader, Dr. Hubert Minnis, and all public figures on all sides of the political divide, please stand up for women. Let us demonstrate that we can still be a country with moral and ethical standards.

Prime minister, your government has not been a bastion of hope for women’s issues. So many promises that were especially targeted to win you support of Bahamian women at the polls in 2012 have thus far proven to be little more than electioneering.

I ask that you not fail Bahamian women on this issue of standing up against abuse. Say something. Let us hear from you – loudly and repeatedly. Do something that will encourage the thousands of women – wives, mothers, daughters, sisters and girlfriends – who have either been abused or who have a tender loved one who has or is presently suffering abuse. Assure Bahamian women that you really do care, that you do not condone or excuse abusive behavior – verbal or physical from any person on your team.

Let us all stand up and support human dignity and respect for one another.

The time for this is now.

• Heather Hunt is an attorney and senator.

April 02, 2014

thenassauguardian.com

Edmund Moxey’s dream about the social, cultural, and economic development of his Bahamian people is alive and well in The Bahamas

'Spoken From The Heart' - Tribute To Edmund Moxey By Sir Arthur Foulkes

GOVERNOR General Sir Arthur Foulkes, in a tribute paid to Edmund Moxey, creator of the Jumbey Village dream, recalled their years in the political trenches together, nourishing a single ambition – the “salvation of a people.”

 

It was felt that today’s Bahamians are paying the price of the brutal crushing of Jumbey Village in those early years of political change.

 

Sir Arthur was the main speaker Friday night in a special programme to pay tribute to the 80-year-old politician and accomplished musician. The programme, organised by the College of the Bahamas, with college lecturer, Felix Bethel as emcee, was held at the Bahamas Harvest Church, Prince Charles Drive. Mario Moxey, Ed Moxey’s son, is the pastor of the church.

 

Following is Sir Arthur’s speech without notes, but “spoken from the heart.”

 

Said Sir Arthur:

 

UNLIKE Dr (Felix) Bethel, I am considerably beyond the age of 65 so it is a little risky for me to say even these few words without notes because I find that the senior moments are occurring more frequently these days. Nevertheless, I shall speak from my heart.

 

I will start with a story, a tale. I know there is at least one person here who has heard it before, but we were campaigning in Andros, Mangrove Cay. And it was Sir Milo Butler, Mr Charles Rodriguez, Edmund Moxey and me. Now Sir Milo and Mr Rodriguez were older than we were, so they got the two beds in Ms Green house, and we got two pillows to lie down on the floor in the front room. And they were both big men, Sir Milo and Mr Rodriguez, and how can I delicately put this, their laboured breathing while they were asleep disturbed us to the extent that we couldn’t sleep. So Ed and I looked at each other, and I said look we’re not going to get any sleep we might as well go out. Ed said let’s go to the beach. We got out of the house and to the beach and we were confronted by hoards of mosquitoes and sandflies and had to beat a hasty retreat back. The next morning at breakfast the older men asked us how we slept, and I struggle to say we didn’t tell them the truth. Just, oh, we slept fine!

 

I say that to say, I have known this man we have come here this evening to pay tribute to, for the better part of half a century. He has been my friend all that time and his dear wife too. He and I have had the privilege of being in the political trenches at a time when it is difficult for young people to understand what we were up against in those days. So I know this man very well and can tell you that that was an era of great men, but there was none greater than Edmund Moxey.

 

Those days it was not about personal ambition, the burning in our hearts was not about the achievement of position and riches. The burning in our hearts was about the salvation of a people, and Ed Moxey passionately lived and breathed that every day of his life.

 

You know the saying about what happens to a dream deferred, how it will shrivel up like a raisin in the sun. In the case of Ed Moxey, we have seen some wonderful things as a result of our struggles. We have passed a time when children had to leave school at the age of 14 and only a few could go to Government High for examination. Now we have thousands of young Bahamians with Bachelors, Masters, and even Doctorates, three Rhodes scholars. But the dream was about even more than that, and Edmund Moxey’s dream was about the social, cultural, and economic development of his people. I believe you just saw the documentary and that tells you some of the story. But what is so painful is that this dream that Edmund Moxey had for the upliftment and development of his people in that concept of Jumbey Village, that dream was strangled like an infant in its crib. It didn’t succeed, it didn’t fail, it was crushed deliberately, and brutally crushed. And you know it is true that if you plant a certain kind of seed today, you will reap the fruit of that seed at some time in the future. If you plant a different kind of seed, you will reap the fruit from that too. One is sweet and the other is exceedingly bitter. And today because of the crushing, the brutal destruction of Ed Moxey’s dream, we Bahamians are paying the price.

 

Now imagine this, let’s look at this from the point of view of tourism. We have tens of thousands of tourists coming on cruise ships practically every day, and the complaint is that there is nowhere for them to go. They go to Paradise Island, Paradise Island, if Ed Moxey’s dream had succeeded, Jumbey Village would have been such a place where it would have been impossible to visit Nassau and not to go over the hill to Jumbey Village. Because the vision was one of a total exposition of Bahamian culture in one big village. Theatres, restaurants, art shops, craft shops, the whole total picture. Can you imagine that? How wonderful that would have been and for my people from over the hill. That is the dream that was crushed.

 

The economic benefit is obvious. Any number of young Bahamians and older Bahamians too from over the hill would have been economically empowered through Ed Moxey’s dream, but I think more important than that is that our people would have been more culturally developed. Bahamian culture would have been on display and in that developed for ourselves and also for our visitors, and the total picture, music, food, dance, Junkanoo, poetry. I thought about it many times, Ed, and I could only imagine how you feel when you think about it. What might have been, what might have been, but rest assured my brother that there are those of us who appreciate what you tried to do, the vision you had for your people. You were pure, you are pure. I never saw in you any great desire for personal position or fulfilment of personal ambition. Your talk, your actions were always about your people, and the plight of your people. That’s what he used to say, the plight of the people.

 

And so it is a great pleasure, even this tinge of sadness in my heart for what might have been. It is a great pleasure for me to be here, to pay tribute to Ed Moxey. But brother do not despair, I have travelled up and down these islands from Abaco to Inagua and the dream is not dead. And for you older people who always talking about this generation going to hell, I keep telling people the first time it was recorded that that was said by one generation of the coming generation, was about 4,000 years ago and it has continued since.

 

I can tell you that yes we have problems with some of our young people, most of the problems are caused by some of our older people. I have seen young people from Abaco to Inagua and all the islands in between who still have the Bahamian dream in their hearts who are still doing the right thing. I was in Long Island once for a graduation ceremony and the valedictorian was a young lady, I think she’s off to school now. I sat there transfixed as this young lady spoke, she was articulate, eloquent in spots, she knew what she was talking about, knew what was going on in the world, and I felt something like Nicodemus… “for my eyes have seen”.

 

I have seen in the faces and eyes of our young people, a braver, better Bahamas. We have hundreds and thousands of young Bahamians who are doing the right things in our country and I hope that the lives of men like Edmund Moxey, they will come to know about and that will help to be an inspiration to them because the talent is there and the love of country is there. And that really is all I want to say to you, God bless you, my brother and your family.

 

Young people please learn about your history, learn about great men like Edmund Moxey and let him and others be an inspiration to you as you continue to build our Bahamaland.

 

March 31, 2014

 

Tribune 242

Value added tax (VAT) and Debt Collection

Debt Collection Expert Speaks Out Regarding VAT and Debt Collection

 

There has been a lot of talk throughout The Bahamas recently regarding the implementation of VAT and the collection of taxes.  While for the most part the talk and views expressed are from respected individuals who are experts in their respective fields, none of the persons can claim to be experts in the field of “debt collection” in general or “debt collection in The Bahamas” in particular.

Apex Management Services has been in business for over 15 years and is the only debt collection agency in The Bahamas that is capable of handling the full spectrum of debt collection with state of the art technology and resources that are all under one roof.

While there are several debt collection options that include; In-house Collectors, Internal or External Attorneys, Internal Call Centers, External Call Centers and Offshore Call Centers, none of the options are as efficient and effective as a Local Full-Fledged Debt Collection Agency, which can handle matters from start to finish without gaps.

Some of the inherent flaws that are associated with the various collection options that often substitute for Debt Collection Agencies are as follows:

Internal Attorneys at best would function similar to an external attorney with the difference being that they would be more accessible.  At worst an Internal Attorney would also have a focus on other duties, which would diminish the attorney’s role as a specialist with 100% focus on debt collection.  Although Day Court is an option, as a matter of convenience, many civil matters, which fall in the Magistrate Courts jurisdiction, are heard in evening court, which would often necessitate odd hour for an internal attorney.

External Attorneys do not operate debt collection agencies; in many instances their main focus is to obtain judgment with little if any interaction with the debtor.  Prior to obtaining judgment and after judgment is obtained; attorneys do not have the capacity to provide the care and attention to each and every individual account.  In most cases attorneys will bill the client after judgment is obtained and the client is still left to collect the amount of the claim.   Many matters handed to attorneys go uncollected long after the attorneys have been paid.

Onshore Call Centers are on the opposite end of the spectrum from Attorneys, in the debt collection process.  While Onshore Call centers are extremely good at interacting with debtors, they have no enforcement capabilities.  If a call center operator is dealing with a debtor who is not cooperating or refuses to pay, the call center has no recourse but to send the debt back to the client who will most likely send it to an attorney thus creating a time and process gap, when time is of the essence.

Furthermore Call Centers have no capabilities to locate debtors whose whereabouts are unknown (Skip Trace) even though a large percentage of bad debt matters require Skip Tracing.  At best, Call Centers are only suitable for early stage debt not late stage debt.

Offshore Call Centers have the same disadvantages as Onshore Call Centers plus the following added disadvantages.

Communication and Culture - In most cases Offshore Call Centers operate in countries where there are cultural differences that are often subtle but significant.  This is compounded when English is not the native language or where patois is predominant.

Geography – Psychologically if a debtor senses that there is some significant distance between the call center operator and themselves they are less likely to cooperate or pay.

Speaking from experience gained working with a major commercial bank that implemented an offshore call center option that failed miserably, Offshore call centers or Offshore Collection Agencies do not work.

The differences that a properly equipped and professional Debt Collection Agency such as Apex makes to the collection process that none of the above options can provide are as follows:

•          Principal has over 30 years of Credit and Collection Experience.

•          Principal is an accomplished Fellow and Member of the largest International Debt Collection Trade Association.  ACA International, the Association of Credit and Collection Professionals.

•          Agency has been in operation for over 15 years

•          Easily accessible well-maintained and spacious offices conducive for customer service.

•          Adequate telecommunication technology and operators to handle thousands of calls daily.

•         Auto-dialers, which exponentially increase the calling and communication capacity of the call center.

•         SMS technology which exponentially increases the communication capacity of the call center.

•          State of the art Collection Management Software capable of handling unlimited number of accounts with integrated financial accounting, diary management and many additional features.

•          State of the art Legal Case Management Software

•          24/7 client web access

•          Skip Tracing Database and Skip Trace Network

•          In House Attorneys that are 100% dedicated to debt-collection-litigation.

“International financial institutions, such as the World Bank and International Monetary Fund (IMF), have propagated a conventional wisdom that revenue collection authorities are more effective when they operate autonomously from the state, as a commercialized entity at arms length from government rather than as a department within the government administration”. 

(Source: Preconditions for Effective Tax Collection, By – Economic Policy Research Unit, Bergen Norway)

A growing number of U.S. states are expanding their relationships with private collection agencies to settle long-overdue taxes.

Her Majesty Revenue & Collection (HMRC) has outsourced some of its debt collection to external agents.  Following a pilot, a notice entitled ‘Modernizing debt collection’ was released explaining that four debt collection agencies will be employed by HMRC to collect an outstanding £140 million of outstanding tax debt.  (Source: HMRC sends in debt collectors for unpaid taxes. By-Nick Lodge, Director of debt management and banking HMRC.)

In Spain alone more than 800 companies specialize in collection of outstanding debt, handling a total of 71 billion euro and generating close to 560 million euro for their business. (Source: DBK, “Empresas de Gestion de Impagados)

With an obvious eye on an opportunity to capitalize on the existing situation, a number of over-night debt collection vendors are beginning to surface without any experience or capacity to perform at a level that would be required.

It would be a shame if we as a country succumb to the temptation to award debt collection contracts based on patronage rather than on merit, at such a time when our country’s financial wellbeing is at stake.

March 28, 2014

Media Contact: Rory Higgs  
Phone: 424-0985 (Cell)

Email: rhiggs@apexbahamas.com