By NATARIO MCKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

and NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Coalition for Responsible Taxation’s co-chairman yesterday urged that a “comprehensive list” of all outstanding Value-Added Tax (VAT) issues be drawn up, with matters involving ‘inclusive’ pricing, loan origination fees and homeowners associations all still unresolved.

Gowon Bowe said the Coalition planned to meet with the Government to bring greater clarity to various “open issues” concerning the private sector before VAT is implemented.

He told Tribune Business: “We had spoken to the Prime Minister and minister Halkitis to get a meeting with the Coalition because there are a couple of matters still pending.

“What we are asking for is really to now prepare a comprehensive list of all of the issues that have been identified to-date. I think there are quite a number, and also to have a working list as to what the resolution has been and what items are open, so we have a very clear understanding of what are some of the critical things.

“We know that there is a lot of debate over the inclusive and exclusive pricing issue. There is likely to be considerable debate on a number of other factors. The inclusive/ exclusive issue is a big one. What we are concerned with is ensuring that businesses are registering and will comply, and that there isn’t an excuse not to comply due to lack of understanding or lack of clarity in what should transpire.”

Mr Bowe said the Chamber was seeking greater clarity on what had transpired between the original 2013 VAT legislation, which had called for ‘exclusive pricing’, and the current legislation which calls for ‘inclusive pricing’.

“We’re looking at a medium that may look at extending the transitional provisions, but certainly having greater clarity on what transpired between the original legislation that had exclusive pricing, to the current legislation that demands inclusive pricing; the business rationale, the economic rationale etc,” said Mr Bowe.

“So far all we have heard is that this is a change so that the consumer knows what they paid at the till, but where the exemptions have been limited. In reality, when you go shopping for goods, there are no exempt goods from that perspective. Is it really necessary to have inclusive pricing, where you could have some goods that may have been zero-rated and others that may have been 7.5 per cent?

“Given that we have now removed the exemptions, is the same need for inclusive pricing as important? It’s not an answer that the Chamber has concluded on; it’s a matter of saying with the dialogue with the Ministry: Is there a medium we can strike by understanding the rationale, and looking at realistic transitional provisions,” he added.

“Originally, the legislation said exclusive, and the new legislation, which was late July, said inclusive. The best time lag that business would have had was five months, even if they had immediately moved in August. Even by extending sort of the transitional time out to March, that doesn’t give a significant amount of time to change systems, prices and businesses practices. Let’s understand the rationale and see if we can strike a medium, and then let’s put in place formal transitional provisions that will be acceptable to all parties.”

Major food retailers and groups such as the Bahamas Federation of Retailers (BFR) have urged the Government to switch to a VAT ‘exclusive’ pricing model, as ‘inclusive’ pricing would mean significant administrative costs. Goods would have to be repriced and relabelled.

Detailing other “open issues”, Mr Bowe said: “There is the interpretation of some of the exempt items, like securities transactions, that are exempt, but brokerage fees that are not.

“It is just drawing clarity, the resident versus the non-resident, as it relates to those that would be zero-rated and those that would be VAT-able, because we have a number of people in Lyford Cay that are residents who would be consuming in the Bahamas but would be non-resident for exchange control purposes.”

Mr Bowe also disclosed to Tribune Business that the Clearing Banks Association (CBA) was facing “clarity issues” on what is included in the definition of ‘loan and savings’ products.

These are to be VAT ‘exempt’, but Mr Bowe said the Government seemingly intends to levy the tax on loan origination fees. The banks, though, believe these are part of the loan, and should be ‘exempt’.

Mr Bowe said the danger here was that the banks could abandon loan origination fees altogether if VAT was levied on them, a development that would increase the interest rates Bahamians must pay on their loans.

The Coalition chief also said homeowners/property associations that hired people would also be penalised under VAT, as they would not receive any relief on these costs.

“That is going to result in government being a net revenue winner, when the intent is that it is a cost recovery mechanism and shouldn’t be VAT positive for the Government,” Mr Bowe said.

He added: “A big issue that hasn’t reared its head in the press, but is a very large issue, are the receivables that will be in existence at December 31.

“The Act and regulations set out that if those aren’t collected by April 30, any collections after that will have to have VAT paid on them. If the goods have already transferred prior to January 1, we have a number of businesses that have very long, dated receivables, given either court matters and the length of time in terms of how it goes through .”

Mr Bowe explained: “It’s saying to me as a business that if you have provided the service in 2014, but because you haven’t been able to collect it by April 30, you have to pay VAT on it. I don’t think it’s the intended consequence by the Ministry, but that is how it is worded currently, and I think the aim was to restrict person trying to rush all types of invoices into 2014, knowing that the product would not be delivered until 2015.

“You have to be careful not to throw the baby out with the bath water. We have those types of issues. Also, there is the virtual warehouse issue that hasn’t been settled in its entirety, particularly with businesses that will use them. There are quite a number of open items.

“The Prime Minister had agreed to assist us in having one comprehensive listing, what is the planned response by the Ministry of Finance, if they have one, and then to designate them open or closed.

“This will bring certainty that if something is not going to change, businesses can know that it won’t, and if they see it as a hill to die on, the dialogue can escalate in that manner. Right now I think there are so many things where businesses say they have made recommendations to the Ministry, they have said they will take them on board, but we haven’t had any conclusive response to say it would change or not.”