Value Added Tax (VAT) is a major component of the government’s fiscal reform program

The fiscal reform series: A deeper dive into VAT

The analysis of the best taxation model and the appropriate mix of taxes for The Bahamas is far from over as we await the final study commissioned by the government and the results of the work done by Oxford Economics – a global advisory firm engaged by the Coalition for Responsible Taxation (Coalition). It is encouraging to see that the government seems to have kept its promise to work with the private sector in the fiscal reform exercise.

While we await the findings of the referenced studies, it would be unrealistic to conclude that value-added tax (VAT) will not be a major component of the government’s fiscal reform program. It is a known fact that the issue of tax reform, in general, and the implementation of VAT, in particular, have been considered for several years and by multiple administrations. Hence, considerable work and analysis ought to have been conducted prior to the selection of VAT as an appropriate form of taxation, even though the general public is not privy to the specific details of such prior analysis. As the clock ticks and the plot thickens on the government’s fiscal adjustment agenda, we take a closer look at this form of taxation, what is being proposed and where we stand today.

The general nature and details of VAT

VAT is an indirect tax; that is, it is a form of tax that is collected by an intermediary on behalf of the government or revenue agency from persons (either individual or corporate) that bear the ultimate tax burden. In essence, the payer of the tax is often different from the ultimate bearer of an indirect tax. Indirect taxes are therefore also defined by the ability of the taxpayer to shift the tax burden.

It is noteworthy to state that the difference between direct taxes and indirect taxes was first discussed at length by Adam Smith, who is regarded as the father of modern economics. In his classic work, “An Inquiry into the Nature and Causes of the Wealth of Nations,” which is abbreviated as “The Wealth of Nations,” Smith articulated extensively the concept of indirect taxes and the impact on necessaries and luxuries, noting the similarities between indirect taxes and direct taxes with the former falling on the consumer, ultimately.

VAT is a consumption tax that is essentially levied on consumers and what they consume. A key objective of introducing VAT, as indicated by the government, is to broaden the tax base, and the choice of VAT is intended to achieve this as the country seeks to join the World Trade Organization (WTO), which requires the reduction of tariff rates. This goal is consistent with the general consensus among a number of economists and public finance experts that consumption tax should be planned with the widest base and positive rate possible.

The VAT rate and revenue

The white paper issued by the government in February 2013 suggested the implementation of VAT at a standard rate of 15 percent with a proposal to have a special rate of 10 percent, exempt supplies and zero-rated supplies. The draft VAT Bill and Regulations were consistent with the white paper in this regard. The export of goods and services are expected to be zero-rated which means that 0 percent VAT will be charged by the supplier and the VAT paid by the supplier can be recovered from the government.

It is proposed that basic food products, soap and laundry detergent, electricity and water supplies based on established thresholds will be exempt from VAT. Exempt services include, among others, insurance services, domestic financial services not provided for an explicit fee, medical services, education services, daycare and after-school care, domestic travel and services provided by a facility to persons in need of care.

It is important to state that companies offering exempt services or supplies will incur VAT on their inputs, but will not be able to directly charge their customers or consumers VAT; hence, their prices may be adjusted to compensate for the increase in the cost of production. It has been further proposed that a special (reduced) rate applies to a supply made in accordance with the regulations by a hotel or similar establishment registered and licensed by the Hotel Licensing Authority; this is presumably to minimize the corresponding impact on the tourism industry.

We know that the minister of finance has indicated that VAT will be introduced at a rate lower than the proposed 15 percent. However, numerous utterances from officials from the Ministry of Finance (MOF) have also made it clear that the choice of the initial rates was based on the revenue needs of the government. On the one hand, revenue from VAT on goods is intended to replace revenue lost from the reduction in tariff rates. On the other hand, VAT revenue derived from the service sector was expected to provide the government with approximately $200 million in additional revenue. In light of the foregoing, it is logical to conclude that a lower rate of VAT will reduce the expected revenue and the projections will need to be adjusted. Luckily, MOF officials have indicated that they have conducted multiple projections based on lower VAT rates.

A tale of VAT studies

By the end of the debate on VAT, there will have been at least four studies conducted by different stakeholders in The Bahamas to ascertain the impact and suitability of VAT for the country. The stakeholders in this regard include the government, the Coalition and the Nassau Institute. The conclusions of the first two studies were different and subject to much scrutiny as well as criticism.

It is a generally accepted notion that the conclusions of research and studies are sometimes skewed towards the client or financier of the study. This does not in any way diminish the credibility of the people carrying out the study, neither does it suggest their lack of professionalism. However, the nature of research is such that it depends on a range of data and variables which are analyzed based on the mandate of the individual or entity commissioning the study. In essence, it is very unlikely that the findings of Oxford Economics will totally favor the government’s proposals and go against the Coalition’s position. The same applies to the new study ordered by the government. In spite of this expected variance, when read in full, the details of both reports should be identical based on the reputation of the individuals conducting the studies and the fact that the same source data is being used.

Conclusion

The decision to introduce VAT at a lower rate has been welcomed by the private sector, although some remain vehemently opposed to this form of taxation. It is encouraging to see the relevant stakeholders come together to ensure that the best formula for fiscal reform success is implemented in The Bahamas with constructive debate on the proposed VAT regime being a major part of this process. It is incumbent upon all parties to be mindful of the four maxims highlighted by Adam Smith in relation to taxes in “The Wealth of Nations.” The maxims cover topics including the need for subjects of every state to contribute support to the government based on their abilities; the importance of certainty in relation to the time and manner of payment as well as the amount payable; the necessity of convenience to the taxpayer in remitting payment and the adoption of a philosophy that takes out or keeps out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Consumption tax is not a new phenomenon and has been implemented in several jurisdictions across the globe. While there has been considerable discourse on the experiences of other nations that have implemented VAT, Singapore and New Zealand have been touted as success stories in the introduction of VAT. Next week, we will take a look at these countries with a view to determining how we can benefit from their VAT implementation story and whether differences in our circumstances allow for a fair comparison.

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

April 08, 2014

thenassauguardian

The issue of Haitian migrants and persons of Haitian descent living in The Bahamas

Call To Stop Discrimination

By AVA TURNQUEST

Tribune Staff Reporter

aturnquest@tribunemedia.net

THE Bahamas government must work to address discriminatory practices towards persons of Haitian descent who apply for regularisation, an official from the Haitian Embassy said yesterday.

Wallenson Nobert, first secretary of Legal Affairs at the Haitian Embassy, charged that the “real problem” faced by the Haitian Bahamian community in the Bahamas stems from the absence of a clear legal framework to process migrants.

In response to a panel discussion hosted by the College of the Bahamas on the complex issue of statelessness within the Bahamian context, Mr Nobert challenged that the use of the term “stateless” to describe unregularised persons of Haitian descent was “inappropriate” given Haiti’s citizenship laws.

However, Mr Nobert said there was an inherent “hypocrisy” in the Bahamas’ handling of citizenship that allowed for a peculiar stratification of rights, adding “either you’re a part of a country, or you’re not”.

Led by Dr Ian Bethell-Bennett, associate professor in the School of English Studies, presenters focused on the effectiveness of citizenship and related immigration policy, and its application in respect to Haitian migrants and persons of Haitian descent living in the Bahamas.

The panel discussion is the second of its kind for the college, which hosted the first panel on the issue in 2012.

COB student Fiona Joseph argued that the regularisation process has deferred the dreams of many persons of Haitian descent born in the Bahamas, who are forced to wait until they are 18 to begin a lengthy application process.

Ms Joseph gave a personal account of her regularisation process as an individual born in the Bahamas to Haitian parents in her presentation entitled, Stateless and (Ba)Haitian in The Bahamas.

She admitted that she did not apply for Haitian citizenship because it would have further complicated her bid for Bahamian citizenship by forcing her to seek naturalisation instead.

Earlier this month, Foreign Affairs Minister Fred Mitchell confirmed to The Tribune that the government does not issue certificates of identity.

He said: “I do not believe that there is a large group of stateless people. What we have is people born to foreign parents who don’t want to get the passport of their parents. We have stopped issuing certificates of identity.”

In his presentation entitled “Statelessness: Real or Imagined?” Dr Bethell-Bennett charged that while states argue over whether or not statelessness exists, and what type, the reality remains that a large group of people in the Bahamas are trapped in a “grey zone”, disfranchised and unable to access basic rights attached to citizenship.

The large population of unregularised persons represents a critical national security issue, according to Dr Ian Strachan, COB’s vice president of Advancement, who stated that progress on the issue has been stalled because of citizenship’s value as a political bargaining chip.

In his presentation, “Ugly Politics: Haitians and Power in the Bahamas”, Dr Strachan argued that immigration policy and procedures have been used for political advancement over the last 30 years, perpetuating negative stereotypes towards persons of Haitian descent while exploiting the migrant community during the election period.

Presenter Stephen Aranha, assistant professor in the School of Social Sciences, provided a critical review of citizenship as defined by the Bahamas constitution, and the recommendations given by the 2012 Constitutional Commission.

Although Haitians represent the largest migrant community, Mr Aranha argued that Immigration processes in the Bahamas were arbitrary, and open to legal uncertainty for all migrants.

Haiti’s constitution affords individuals born of a “native born” Haitian parent automatic entitlement to citizenship, if they choose to accept it, according to Mr Nobert, who encouraged individuals of Haitian lineage to seek assistance from the embassy regardless of their status.

However, presenters argued that the law is not clear on whether or not this right is passed on to third generation descendants whose parents were not born in Haiti, or have no legal documentation.

Presenters called for the government to either lower the age requirement for persons to begin applications for citizenship, or do an overhaul of the requirements to bring them in line with migration realities.

Mr Nobert’s comments echo concerns raised by the United Nations Human Rights Council, most recently the need for strengthened reporting mechanisms and statistical research on migrant communities in the Bahamas.

April 11, 2014

Tribune 242

The Bahamas government is awaiting feedback from the Public and private sectors ...to determine whether there is a viable alternative to Value Added Tax (VAT)

FNM Senator: Bahamas Not Ready For VAT

By Jones Bahamas:

The government has yet to reveal the introductory rate or date for implementing Value Added Tax (VAT), but an Opposition politician is convinced The Bahamas will not be ready by the initial proposed timeline of July 1.

In fact, Free National Movement (FNM) Senator Kwasi Thompson said this is “highly unlikely.”

“The government has not done enough to educate the public and I also ask the questions – are the necessary infrastructure in place? Have all the necessary persons being hired? Have all the necessary persons being trained? Most businesses are still unsure how it works and how it will affect their businesses. There are many issues in terms of VAT,” Senator Thompson said.

Flying in the face of ongoing backlash, the government is pushing ahead with VAT, a tax reform system the Christie Administration insists is needed to expand the country’s revenue base and one that is critical to preserving the country’s confidence as a secure and attractive destination for investment, which can be achieved “no other way.”

Finance experts have repeatedly stressed that to ignore such fiscal planning imperatives would be at the country’s peril.

The International Monetary Fund (IMF) has branded the country’s current tax system as both inefficient and inequitable.

It is the government’s intention to register only businesses with a turnover exceeding $100,000 per annum, thereby avoiding the “entanglement of smaller business in the system of VAT collection and filing.”
According to Mr. Christie, the government would still capture well over 95 per cent of the total turnover in the economy in this way.

“Focusing on the larger firms will also ease the administration of the VAT,” he has said.

But Mr. Thompson lamented the fact that in its present form, the VAT bill requires businesses to file papers on a monthly basis, a process he described as “onerous.”

“What is even more egregious is that the payment of VAT is required 21 days after the work is completed or the bill is submitted and that is whether you have been paid or not,” he said.

“I believe this bill will be disastrous for small business, who do not receive payment for services immediately after their work is completed or do not receive payment immediately after their bill is submitted. In fact, the bill that is submitted sometimes for the service is not always the bill that will be paid. So, I believe even before we get to implement this process, these are the kinds of things that must be looked at must be addressed.”

The government is awaiting feedback from the private sector and the public before actually determining whether there is no viable alternative to VAT.

The Bahamas Hotel Tourism Association is pushing a Smart Tax.

Meantime, the Coalition for Responsible Taxation also believes there are options other than VAT including implementing a payroll tax.

The group is compiling a report on its recommendations.

April 09, 2014

Bahama Journal

Value Added Tax (VAT) would likely change the retail grocery industry in The Bahamas “for the worst” ...says Philip Beneby, the Retail Grocers Association’s president

Vat 'Straw To Break Back' Of Food Retail

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Food prices would have increased by more than 7 per cent under a 15 per cent Value-Added Tax (VAT), with a sector body warning this tax in any form will be the “straw to break the back of our industry”.

Philip Beneby, the Retail Grocers Association’s president, in a February 2014 letter to the Coalition for Responsible Taxation, warned that VAT would likely change the industry “for the worst”, pointing out that a net eight food stores had closed across New Providence and Grand Bahama since 2009.

The letter, obtained by Tribune Business, has come out as the food retail and wholesale industry prepares to hold another meeting today with Shane Gibson, minister of labour and national insurance, over potential price control reforms to mitigate VAT’s impact.

Mr Beneby, speaking to this newspaper yesterday, confirmed the meeting amid industry hopes of an increase to the 43-year gross margin on price controlled items of 18.67 per cent.

“We are hoping we have a positive response from him in that regard, as far as the increase to the price control gross margin,” he told Tribune Business. “We are looking for, pushing for a mark-up increase from 23 per cent to 39 per cent. That’s what we’re pressing for.”

In his letter to Coalition co-chair Robert Myers, the Retail Grocers Association president said price control restrictions “meant that our businesses are slowly being strangled”. The 18.67 per cent permitted gross margin fell well short of the 25 per cent cost structures maintained by many retailers, turning these items into loss leaders.

The meeting with Mr Gibson comes amid other concerns for the industry, which include Business Licence fees that have more than doubled, plus hefty real property tax payments.

The Government’s Business Licence Unit has to-date rejected the food retail/wholesale industry’s request that it be allowed to pay the annual fee in stages.

Yet Mr Beneby conceded that some members felt they were being treated unfairly, and were subject to ‘double standards’, as they were hearing other businesses and industries were being allowed to make ‘phased’ Business Licence fee payments.

“They’re feeling it,” he told Tribune Business of the Business Licence fee increases. “It’s really difficult for them to find one lump sum payment, especially with having to deal with real property tax, National Insurance Board and all these other things and payments at the same time.

“All these things have to be in line before you get the Business Licence. With the way the economy is, the way business is and all these other operating costs, it’s difficult.”

Rupert Roberts, Super Value’s owner and president, told Tribune Business that the Government’s policies were effectively subsidising food purchases by the rich, “millionaires and billionaires”, and making 60 per cent of their purchases duty-free.

He reiterated that the combined effect of VAT ($6 million at 15 per cent); the increase in Business Licence fees to $3.1 million; and real property tax would be to increase Super Value’s annual tax burden by around $12 million.

In his February 2014 letter, Mr Beneby said the premise that duty reductions would offset VAT’s impact did not apply to the food retail and wholesale industry, which operates on gross margin dollars - not percentages.

“Our expense base is expected to increase with the introduction of VAT, and we will be required to produce the same level of gross margin dollars from a lower cost base,” Mr Beneby told the Coalition’s co-chair, Robert Myers.

“In order to achieve this, we have calculated that overall grocery prices will increase approximately 7 per cent, although this increase will be much higher on non-price controlled items to offset the restrictions on increased prices on bread basket items.”

Mr Beneby confirmed that the Government had dismissed the Association’s plea to impose a flat 7.5 per cent VAT rate across all food and grocery sales, expressing particular concern about the plan to classify the majority of the industry’s inventory as ‘VAT exempt’.

By applying this treatment to products that are ‘breadbasket items’ and/or price controlled, the Retail Grocers Association chief said food stores would be unable to reclaim the VAT ‘input tax’ payments they make in proportion to these supplies.

As a result, food retailers will be unable to recover between 50-80 per cent of their VAT ‘input payments’ on costs such as rent and utilities. If VAT had been introduced at 15 per cent, they would have seen such costs increase by between 7.5 per cent to 12 per cent.

“A review of the sales mix indicates that approximately 50 per cent to 60 per cent of current sales generated by the larger retail grocery stores, and 75 per cent to 80 per cent of sales generated by the smaller retail grocery stores, will be classified as Exempt (under the draft legislation), thus reducing the reclaimable VAT on overheads by the same percentage,” Mr Beneby warned.

“The impact of this issue will be the increase in overhead costs such as rent, utilities, security, marketing, office, repairs and maintenance, etc, by 7.5 per cent to 12 per cent.

“ Our businesses are in no condition to absorb these costs and they will be passed on to consumers in the form of higher prices. This increase will be in addition to the 7 per cent noted earlier.”

Mr Beneby’s letter described the Association’s three VAT-related meetings with Ministry of Finance officials as “a waste of time, as the officials are simply not listening to our concerns and suggestions, nor to the supporting information we have provided that contradicts much of their positions.

“It is extremely frustrating to have individuals, who have never operated a business, never have had to worry about meeting sales targets, or ensuring payroll is financed, dictating to us what is best for our business,” he added.

“From our perspective, they are not concerned about the well being of our businesses and the many thousands of Bahamians that are, directly and indirectly, employed by us and whose jobs and livelihoods are at risk.”

Summing up VAT’s likely impact regardless of whatever rate was chosen, Mr Beneby said: “It should be noted that 16 major food stores have closed in New Providence/Grand Bahama since 2009, with only eight of them re-opening. We know that some of our members are currently incurring losses, and unfortunately we expect further store closures with the implementation of VAT under its proposed format.

“Our customers are already under duress, as can be seen in the shift in their spending habits, and lack the ability to absorb significant increases in the cost of groceries. The implementation of VAT, under its proposed form, or indeed any form, may be the straw to break the back of our industry, and we are in no doubt that the face of the Bahamian retail grocery landscape will change for the worst.”

Mr Beneby warned that the industry was opposed to shelf pricing that ‘broke out’ the amount of VAT payable by consumers. He pointed out that in most countries, VAT was included in the total price, with the tax amount shown on the receipt.

Railing against shelf pricing that was exclusive of VAT, he said: “Many Bahamian consumers lack the capability to budget, and will not be able to relate their spending ability to their desired purchases.

“VAT exclusive pricing will lead to mass confusion at registers, with inevitable delays and disgruntled customers. We recommended that the pricing of goods be inclusive of VAT, but this was dismissed.”

Mr Beneby also described the Government’s ‘bonded warehouse’ plan, designed to prevent ‘double taxation’ and ease the VAT transition, as “completely impractical” and lacking support from the Association’s members.

The concerns, he added, related to “space restrictions, the burdens that will be imposed on the ease of business, the lack of confidence in the Department of Customs to execute, and the costs of inspections far outweigh any benefits to a bonded warehouse”.

“Without a credit system in place of duty already paid, larger importers and wholesalers will reduce bulk purchases or will temporarily cease importing food items – this will lead to increased prices or food shortages,” Mr Beneby warned.

“We recommend that businesses have their auditors provide a certificate for tax credits as at June 30, 2014. This certificate and the supporting information would be made available for audit by the Department of Customs.”

Mr Beneby also noted that food retailers and wholesalers had suffered a 20 per cent increase in freight costs, something they blamed on the “monopoly” created by the new Arawak Cay port.

“The increase in operating costs has come at a time when middle and lower income consumers are dramatically shifting their shopping habits to spending less and focusing more on bread basket items, while upper income consumers are abandoning Bahamian retail stores to shop on-line with US based establishments,” Mr Beneby added.

April 07, 2014

Tribune 242

Political victimization and incompetence on the Royal Bahamas Police Force (RBPF)

By Dennis Dames:

I received a telephone call from my father today.  He is a retired Assistant Superintendent (ASP) of the Royal Bahamas Police Force (RBPF).  He’s very outraged about a Superintendent of that organization in the name of Stephanie Demeritte, escorting prisoners to court.  He says that it is out of place and dead wrong; it’s really a job for a Constable. 

 

My dad further stated that Superintendents are essentially executive officers on the Royal Bahamas Police Force (RBPF) - who in some cases, command hundreds of men and women.  He said that it was also wrong to have had the late Superintendent Sands performing the same low ranking work.

It is a shame to see Superintendent Demeritte like the late Sands waste away in a senior rank which is just below Assistant Commissioner.  It is a reflection of an organization which appears to be in the evil grip of politicians, or plain old incompetence.  The Commissioner of the Royal Bahamas Police Force should be embarrassed and ashamed every time he sees a senior commander of his force in the newspapers or on the evening news holding on to prisoners on their way to court.

It’s a situation, according to my father – which no doubt is contributing to the low morale on the Royal Bahamas Police Force (RBPF).  Why would a competent Bahamian join an organization that has no respect for its executive rank?  It means that it’s possible for a Superintendent of police in The Bahamas to direct traffic, work on the fire truck, be a chauffeur et al - under the existing status quo.

It is not a good reflection for the future of the Royal Bahamas Police Force (RBPF) in my opinion.  We need to do better in our beloved country, if we expect better.  Stop the political victimization and shallowness in The Bahamas; or like the late Sir Lynden Oscar Pindling (SLOP) use to say: What goes around comes around – my brother!

April 07, 2014

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