Bahamas Blog International
It would be impossible for The Bahamas Government to implement Value-Added Tax (VAT) in the face of widespread private sector opposition ...says the Coalition for Responsible Taxation economist
Related to country: Bahamas
By NEIL HARTNELL
Tribune Business Editor
Nassau, The Bahamas:
The Tax Coalition’s newly-hired economists will start work this week, with one of its co-chairs yesterday suggesting it would be impossible for the Government to implement Value-Added Tax (VAT) in the face of widespread private sector opposition.
Robert Myers, speaking in the wake of the Coalition for Responsible Taxation’s decision to hire Oxford Economics to conduct dynamic economic modelling of all potential tax reform options, said rushing VAT into existence on July 1 would only “backfire” on all stakeholders.
And he agreed with Tribune Business’s suggestion that, with just over four months to go, it was virtually impossible from a practical perspective for the country - both private sector and the Government - to implement VAT by July 1.
Referring to the Family Islands specifically, Mr Myers said many groups there did not know “what the hell this is about”, while small businesses that exceeded the VAT registration threshold needed financial and technical assistance to meet their compliance obligations.
The Tax Coalition co-chair, though, did indicate that VAT at a lower rate than 15 per cent would be more palatable to businesses and consumers - something also suggested by Ryan Pinder, minister of financial services, in his Mid-Year Budget presentation.
Oxford Economics, according to a schedule seen by Tribune Business, is due to present its final report in the week beginning May 5, 2014.
The consultancy firm is currently engaged in a review of all available VAT documents and literature, and will next week begin consultation with both the private and public sectors - something scheduled to last two weeks.
Simultaneously, Oxford Economics will also start comparative VAT research and its dynamic economic modelling processes, in a bid to forecast the impact this tax - and other reform options - will have on key Bahamian economic indicators, such as growth and employment, going forward.
The preliminary results and key findings from their work will be presented between the seventh-ninth weeks of its contract, with a draft report presented in the week beginning April 28. Oxford Economics’ final report will then be presented the following week.
Mr Myers, in an e-mail issued on Friday, February 21, confirmed: “The BCCEC Coalition for responsible taxation has retained the services of Oxford Economics to conduct dynamic economic modelling that will evaluate the effects VAT and a number of other alternative taxes will have on the economy and, in particular,r our levels of industry competitiveness locally and regionally.
“It is hoped that the modelling and reports derived from this research will allow the Coalition to make recommendations to the Government on means of additional government revenue while maintaining positive economic growth.”
Oxford Economics is well-known to the Government, having performed economic impact analyses for numerous major investment projects in this nation, including Baha Mar’s $2.6 billion Cable Beach expansion.
Mr Myers said the Coalition’s choice met “no objection” from the Government when it submitted the names of candidates to it.
He added: “In an effort to remain collaborative with the Government, we also provided a copy of the RFP that went out to the economist. As has been publicised, the Government has agreed to support our study and we have, in fact, already moved the schedule forward by a few days.”
Speaking to Tribune Business from abroad, Mr Myers said the study, which will examine both VAT in its proposed and modified forms, and other options such as a payroll tax, would focus heavily on the effects for industries such as tourism, construction, the wholesale/retail sector and services in general.
The Oxford Economics study will be completed less than two months before the July 1 VAT implementation target and, when asked whether there would be enough time for its results to influence government thinking, Mr Myers replied: “I have to say yes, given when the Prime Minister has said.
“We’re going to do it anyway. Even if they pass it [VAT legislation] but don’t enact it, I can’t imagine they’d want the business community against it. It doesn’t make any sense to do it with the business community against it.
“I don’t see any upside in rushing it, that’s for sure. That’s just going to backfire.”
Mr Myers said his “sense” was that while the Government would like to implement VAT by July 1, they would instead wait, given the opposition and angst it was causing.
He added, though, that the Bahamian private sector might be more accepting of VAT if it was introduced at a lower rate than the proposed 15 per cent.
“Clearly, at least from my opinion, nobody’s loving VAT at 15 per cent as proposed,” Mr Myers told Tribune Business.
“If they went with VAT, a lot has to be done to get it to the point where the business community is accepting of it, and that’s in the implementation, the ongoing administration and amount it would be.”
The Tax Coalition co-chair said Oxford Economics was “good to go” with its economic modelling, with the study timetable having moved forward three to four days.
“It’s important for the country to do the right thing, and hopefully the leadership will appreciate that,” Mr Myers added. “I get the sense they do.
“There’s a lot of noise in the market, but I feel they’re [the Government] anxious to see the results and work things through with us.
‘It’s frustrating for us at times when certain ministers and civil servants say certain things, but hopefully they’ll do the right thing in the end.”
The clock also appears to be moving against the Government’s VAT implementation deadline, with just over four months left to July 1 and much left to be done - both inside government and the private sector - in terms of education and preparation.
The VAT legislation and regulations remain in draft form, and have yet to be signed off on by Cabinet, let alone passed by Parliament, while not even a draft Tariff Schedule has been released for public consultation.
Mr Myers yesterday agreed that July 1 seemed an impossible target from a practical viewpoint, adding: “The problem is, from what I can tell, that they [the Government] haven’t reached various Out Island groups.
“There’s a lot of country left that still does not know what the hell this is about. And there’s a tonne of small businesses in that [$100,000] threshold that do not have the capacity to do this.
“They have no understanding of this, and no capacity to do this. All these little guys, if the Government doesn’t help them get sorted, they’re not going to get sorted out themselves.”
Mr Myers estimated that just 20 per cent of the Government’s forecast 4,000 mandatory VAT registrants were large companies, with their small brethren needing software, IT and Point of Sales help.
He added that the Government, too, was beginning to recognise this issue.
February 25, 2014
|February 26, 2014 | 7:46 AM
Ishmael Lightbourne, coordinator of The Bahamas government’s value added tax (VAT) unit should should be dismiss ...as he is a chronically delinquent tax payer
Related to country: Bahamas
PM’s VAT consultant should be dismissed
The Nassau Guardian Editorial
Nassau, The Bahamas -
The government has pledged to implement a value-added tax (VAT) on July 1. The 15 percent VAT is intended to expand the tax base in The Bahamas and bring more money in.
The government has been running large annual deficits for years. Of late they have been in the range of $500 million. Our level of spending is unsustainable based on the amount we take in. However, instead of radical spending cuts being at the heart of reform, a VAT-led tax increase is the plan to help close the gap.
In this context, government ministers and officials have been pontificating about the problem and the need for the Bahamian people to embrace paying more to fix it. Ishmael Lightbourne, coordinator of the government’s VAT unit, has been at the forefront of the state’s public relations campaign pushing VAT.
“I think the essential issue is the country’s fiscal position which is consistently showing a deficit gap, and that is not getting better from our present tax regime, and we are putting ourselves further and further into deficits and national debt,” he said in an interview with this newspaper in October of last year.
“In that position, my focus has always been that if we do not get off that path, we’ll be losing a chance to voluntarily make these changes in terms of expanding the revenue base or reducing the cost of government.”
Lightbourne has spoken regularly of the need to hold people “accountable” for what they owe.
Last week it was revealed that the government’s tax messenger was not paying his real property taxes. Lightbourne has not paid property taxes in at least 10 years. He told The Nassau Guardian he “recognizes the hypocrisy and contradiction of this”.
“That has been a major source of pain and discomfort,” he said.
Lightbourne has not been paying real property taxes even though his beachfront residence on West Bay Street is only assessed at $321,000 (property included) and as such his real property tax bill has only been $534 per year.
Prime Minister Perry Christie hired Lightbourne just over a year ago and designated him a point person, the messenger, to lead the push toward VAT.
The prime minister should now dismiss Lightbourne from this role, as he cannot be the one demanding that hardworking Bahamians pay more when he has not been paying what he owes to the state in these taxes. The Progressive Liberal Party (PLP) administration should not have a tax dodger in such a position.
FNM Chairman Darron Cash was right to described Lightbourne as a “flawed messenger” who is unfit to carry the government’s torch on the VAT campaign.
"Mr. Lightbourne's decision to not pay property taxes for 10 years suggests a willful refusal to pay," said Cash in a statement.
"Consequently, he has lost all legitimacy as the principal spokesman and advocate of VAT."
We hope the prime minister sees the simplicity in this matter. Lightbourne must go from his post. Bahamians should not be insulted by having to listen to a messenger who clearly does not believe in his own message.
February 24, 2014
|February 24, 2014 | 1:00 PM
Human trafficking awareness — A lesson for unsuspected victims
BY VICTOR BARRETT:
I am motivated to write this article because I was taken aback when I discovered whilst talking to some of my classmates that they really don’t know what exactly is human trafficking.
Trafficking in human beings, especially women and girls, is modern-day slavery. It spans national and international boundaries and is considered to be a gross violation of the basic human rights. Victims of human trafficking are often mentally, physically and sexually abused and forced into service without pay in the worst condition.
Despite the brutal nature of human trafficking, many countries have either been slow to recognise the problems associated with human trafficking or have been unsuccessful in combating it. Jamaica is a source, transit, and destination country for adults and children subjected to sex trafficking and forced labour (US Department of State 2013 Report).
Whilst there is no compelling evidence, it is arguable and highly probable that some of our young women and girls that are reported missing daily might be victims of human trafficking.
How does a mother from deep-rural Westmoreland identify what is human trafficking? Sex trafficking of children and adults likely occurs on the street, in nightclubs, bars, and in private homes throughout Jamaica, including in resort towns.
In addition, massage parlours in Jamaica reportedly often lure women into prostitution under the pretence of employment as massage therapists and then withhold their wages and restrict their movement — key indicators of human trafficking.
People living in Jamaica’s poverty-stricken garrison communities, territories ruled by criminal dons, effectively outside of the government’s control, are especially at risk.
Children from poor families are sent to better-off families or local dons with the intent of a chance at a better life are highly vulnerable to prostitution and forced labour, including domestic servitude. Other at-risk children include those involved in street vending as well as those engaging in begging.
Action, Means, Purpose
This definition of human trafficking contains three separate elements all of which must be present for a situation of trafficking in persons to be recognised as a breach. The first element relates to the action — recruitment, transportation, transfer, harbouring or receipt of persons.
The action element is the actus reus of trafficking. This element is critical in establishing the scope of the trafficking protocol’s definition. The action element has the effect of encompassing within the definition, not just recruiters, brokers and transporters, but also owners and managers, supervisors and controllers of any place of exploitation such as a brothel, massage parlour or household.
The second element is the means, which is the second part of the actus reus of trafficking. The means element — force, coercion, abduction, fraud, abuse of power or position of vulnerability, and giving or receiving of payments or benefit to achieve the consent of a person having control over another person — is relevant only to trafficking in adults.
The use of the word coercion is an umbrella term, used previously in the context of trafficking which refers to the range of behaviours including violence or threats use of force.
Deception and fraud are examples of less direct means and will generally relate to the nature of the promised work or service. Abuse of power or of a position of vulnerability is defined as an additional means through which individuals can be recruited, transported, and received into situations of exploitation.
The European Trafficking Convention goes further than the framers of the protocol in stating that: “The vulnerability may be of any kind, whether psychological, emotional, physical, familyrelated, social, or economic. Persons abusing such a situation flagrantly infringe human rights and violate human dignity and integrity, which no one can validly renounce.”
The third element is the purpose, which is the mens rea requirement into the definition.
Trafficking will occur if the implicated individual or entity intended that the action — which, in the case of trafficking involving adult victims, must be taken through prohibited means — would lead to one of the specified end results.
The UN Office on Drugs and Crime refers to this element in identifying trafficking as a crime of specific or special intent (dolus specialis).
It defines the dolus specialis of trafficking as “the purpose aimed at by the perpetrator when committing the material acts of the offence”.
Root causes of human trafficking in Jamaica
The supply and demand equation is typically described in terms of “push and pull” factors.
These factors have a global resonance, but vary in local emphasis and scale. Poverty, high unemployment and lack of opportunity, the quest for a means of survival serve as the engine driving trafficking in humans.
The push/pull factors — two sides of the same coin — that make women and girls particularly vulnerable are rooted in systemic gender discrimination.
It is important to remember that these explanatory factors can be mutually reinforcing, and some of the causes can also be the consequence of others.
Factors contributing to supply (push):
- Lack of legitimate and fulfilling employment opportunities particularly in rural communities;
- Disruption of support systems due to fact some fathers are absent (dead, prison)
Factors contributing to demand (pull factors)
- Women’s perceived suitability for work in labour-intensive production and the growing informal sector which is characterized by low wages, casual employment, hazardous work conditions, and the absence of collective bargaining mechanisms;
- The increasing demand for exotic dancers, workers for domestic and care-giving roles, and the growth of the billiondollar sex and entertainment industry, tolerated as a “necessary evil” while women in prostitution are criminalised and discriminated against;
- The ease in controlling and manipulating vulnerable women.
You may choose to look the other way, but you can never say again that you did not know. — William Wilberforce
Victor Barrett is a Jamaican final-year student at the University of the West Indies Faculty of Law, Cave Hill Campus, Barbados.
February 19, 2014
|February 19, 2014 | 10:02 PM
Businessmen fear for the future of The Bahamas’ economy ...if value added tax (VAT) is instituted
Related to country: Bahamas
Has A Promising Vat Failed Barbados?
Nassau, The Bahamas:
IN THIS column yesterday, we reported conversations that we had over the weekend with various businessmen about their fears for the future of this country’s economy if VAT were introduced.
It was not that they were against a tax of some kind to raise money to meet the country’s growing expenses, and reduce the public debt, but they did not think that VAT was the answer for the Bahamas’ economy. Rather than encourage growth, they saw it as a retrograde step, that would discourage investment, and price this country out of its number one industry — tourism.
They also talked of the brain drain that threatened the future growth of a country at the crossroads. In yesterday’s article, we wrote: “The brain drain has also started. The young business person said that it was sad that so many Bahamians have lost confidence and have either started to leave the Bahamas, or are planning to leave.
“‘These are the people with the talent that is needed in this country,’ he remarked.”
The gentleman telephoned after the article was published to clarify his reference when he talked of the country’s critical brain drain.
It was not VAT that was driving them out, he said, but they were leaving because of deteriorating social conditions. “They no longer believe that the Bahamas is a desirable society in which to raise a young family. Escalating crime was the main driving factor,” he explained.
And so we have on one side Bahamians losing confidence in their country’s economic growth and on the other fleeing its out of control violence.
They also talked at length about fiscal restraint, of politicians not setting an example by trying to cut back public spending in areas where it should be trimmed even in the best of times.
One of the sticking points was travelling politicians with a retinue of hangers on in tow.
Even former Exuma MP George Smith – considered a PLP party elder – is critical of Foreign Affairs Minister Fred Mitchell’s frequent flying schedule. (See today’s front page). Mr Smith noted that Mr Mitchell travelled a lot – “probably a lot more than necessary”.
Last year, Mr Mitchell scoffed at such public criticism. He believes that the job of a foreign minister is to carry the flag abroad, seeking new friends for his country, and, hopefully encouraging investment. Of course, in these budget cutting times we also have Minister of Financial Affairs Ryan Pinder out and about ostensibly doing the same thing.
Noted Mr Smith: “Ryan is making the rounds, but I don’t know how much results you’ll see out of that.”
Last year in a public statement, Mr Mitchell declared that he fully intended to fill the foreign minister’s role. Giving advance warning to the public of his intentions, he said that it would take him out of the Bahamas for most of this year. He dismissed his critics as part of an “idle” and “silly” debate. “Stupidity in its purest form,” he scoffed.
On Thursday, he will be on the University of the West Indies campus in Trinidad giving a talk on “Saving Caricom.”
The cost of these overseas trips has been questioned, but all Mr Mitchell is prepared to say is that everything is “within budget”. Maybe he will one day tell us what his “budget” is so that we can make our own judgment as to whether it is within budget, or whether the budget — considering our present economic condition — is too generous.
There are so many areas where there can and should be cost cutting. Mr Christie should start with his own bloated cabinet. Even Mr Smith did some finger-pointing in this direction. Many Bahamians see these sinecure positions as election rewards for party supporters. There could be no criticism if they were being supported from the party’s coffers, but this is the public’s money over which liberties should not be taken.
And then there is the overstacked civil service. There were high-ranking PLPs who as far back as the Pindling era recognised that this tree needed a drastic trimming. But no one had the courage to lop off so many solid voters. The Bahamas has many outstanding civil servants, but the service would be more efficient if more had been hired for their abilities, rather than for their willingness to mark their X against the party’s name on election day.
Since last year’s visit to the Bahamas of Owen Arthur – three-term former prime minister of Barbados, who introduced VAT to his country in 1997 after a long period of preparation – the economic situation of Barbados has gone downhill. It is reported that the Barbados government’s wage bill — “the highest in the region”— rose to 10.3 per cent of GDP last year and the international reserves had fallen to US$468 million by the end of October.
Although Barbados’ current prime minister Freundel Stuart maintained that the position of his party was that civil service layoffs would be a “kind of last option when every other option failed”, Barbados is obviously facing failure. At the end of last year, Stuart’s economic affairs minister announced that his government would not only trim the public service, but would also “reduce by 10 per cent the salaries of ministers, government legislators, parliamentary secretaries and those considered to be a ‘political appointee’.”
On Friday, it was announced that the Barbados government had started to lay off the first batch of workers in the public service as it sought to reverse an ailing economy.
In his Freeport speech last year on the merits of VAT, Mr Arthur had warned: “Because of its very nature, the VAT tends to introduce a higher level of buoyancy to the tax system. The growth in revenues will tend to outstrip the growth of the GDP. There will be the appearance that the state is flush with cash, and that extraordinary expenditure claims on the Treasury can be made. Fiscal disorder can in consequence ensue, triggering in turn a need for adjustment to the VAT rate.”
Did Barbados fail to adhere to this warning? And what of the Bahamas?
February 05, 2014
|February 15, 2014 | 1:54 PM
Playing Mas with CARICOM
By Claude Clarke, Jamaica Gleaner Contributor:
In three weeks, 'the greatest show on earth' will roll round the Port-of-Spain Savannah in colourful splendour. Masquerade and bacchanal will abound as in two days of unrestrained ecstasy, revellers will gorge on grog and wine themselves into frenzy. Masquerade in Trinidad is more than a festival; it is a way of life.
Masquerade is pretence. It is full of posture and pose. It is imagery. It feels good while it lasts, but in the end, it produces little more than a short-term high.
In many ways, carnival Mas is analogous to the Caribbean's regional economic union, CARICOM: full of posture and style but unable to provide economic uplift for all its members. The so-called common market is more show than substance. And for Jamaica, it has been an unaffordable indulgence.
Interestingly, Trinidad, the most experienced in the art of masquerade, has been able to distinguish between the superficies of CARICOM and serving its national economic interest, while Jamaica, a recent convert to carnival, is captivated by the imagery of the regional organisation.
While Trinidad has used its energy advantage to exploit the opportunities of the common market, Jamaica has distinguished itself by slavish adherence to the CARICOM rules.
Jamaica's dismal trade record in the region tells the tale. One year before the 1989 Grande Anse Heads of Government Meeting, at which the decision to adopt a Single Market and Economy was made, Jamaica's trade with CARICOM was balanced, at just under US$60 million. Since the implementation of the CSME, our exports have barely moved; but our trade deficit with the single market skyrocketed and peaked at more than US$1.5 billion in 2008, almost 12 per cent of our GDP.
This surge in imports from CARICOM has come with grave economic and fiscal consequences. It has left a gaping hole in Jamaica's capacity to provide employment and create productive jobs. Output of goods and export services has contracted. Large segments of our population have been excluded from the economic mainstream and relegated to streetside hustling, scuffling and economic hopelessness. And the society has been living with increasing unemployment, disorder and lawlessness.
The Jamaican people have been left with a predicament, which a taxi driver recently described to me as 'too much man' an' too much lan': a condition created by structural uncompetitiveness, which prevents an economy from properly utilising its available economic resources.
The absurd irony is that the resolution of this problem should be the single market's principal justification: the efficient allocation of economic assets, which would enable labour to migrate away from locations where jobs are scarce to places where they are available.
But the CSME's structure does not accommodate such movement. Its immigration policies have not been designed to do what now takes place in the Western world's other single market and economy, the European Union (EU). An open passport is all that an EU citizen needs to walk through an immigration checkpoint within the EU. And once inside the Schengen Region, there is no visible check.
The free movement of labour is a fundamental principle enshrined in the EU treaty, enacted in state law and developed by the rulings of the European Court of Justice. Under this principle, EU citizens are entitled to:
1. Look for a job in another EU country;
2. Work in any member country without obtaining a work permit;
3. Reside in any member country; and enjoy almost equal treatment with nationals in access to employment, working conditions and other social and tax advantages.
CARICOM's failure to implement similar measures while providing for the free movement of goods has cost Jamaica dearly. And so we struggle with the consequences of joblessness while our leaders continue to be dazzled by the glamour of the CSME.
Forty years ago, before there was a CSME, I visited Trinidad. Then, Jamaicans did not have the 'privilege' of being included in the same immigration line as T&T nationals. Then, the only questions asked by the immigration officer were where and how long you would be staying or the name of the company with which you would be doing business.
Based on my own recent personal experience, now that 'citizens of CARICOM and Trinidad and Tobago nationals' stand together in the same line, T&T's immigration officers require the specific name and telephone number of the individual with whom you will be doing business. The officer, and before her, the T&T national airline must also see evidence, not just that you will be leaving Trinidad but that you have in hand the transit documents to return, not to any old place like Barbados or the USA, but to Jamaica, where they are sure you cannot be refused entry.
Of course, all this is avoidable if one is the holder of what is called a CARICOM Skills Certificate: a kind of visa, if you will, to establish that you are not just an ordinary person but a member of an elite class, comprising university graduates, media persons, artists, musicians, sportspersons and other professionals with specific skills.
ACCEPT BENEFITS, BURDENS
Nowhere is there room for the tens of thousands of ordinary Jamaican workers whose jobs have migrated to other CARICOM countries. In a common market, jobs will inevitably move between states. The CSME fails to recognise that a single market and economy does not exist if ordinary workers are unable to follow their jobs and compete to recover them. If we are going to be serious about a single economy, each state must be prepared to accept the benefits as well as the burdens that come with it.
A single market and economy should, in fact, work like insurance. You pay the premiums (as an open immigration policy might be seen) in order to get the benefits such as increased export earnings and economic expansion.
A state that is happy to earn billions of US dollars from the region must also be prepared to allow the unimpeded inflow of ordinary people from the region to participate in this economic gain.
As long as Jamaica remains in CARICOM while suffering US billion-dollar trade deficits and spend billions subsidising regional imports, the least our leaders must do is insist on the free movement of people within the CSME.
We cannot remain part of an organisation that robs our people of employment, our economy of foreign exchange, and our government of valuable revenue. We cannot continue to support an arrangement which denies ordinary Jamaicans the opportunity to compete for employment on an equal basis with other CARICOM nationals when their jobs are being shipped to other parts of the region.
Can we expect our leaders to do what is necessary? Or will they continue to play mas with CARICOM?
Claude Clarke is a businessman and former minister of industry. Email feedback to email@example.com.
February 09, 2014
|February 9, 2014 | 9:09 AM
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