By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top private sector executive yesterday suggested it was premature for the Prime Minister to suggest the International Monetary Fund (IMF) had praised the Bahamas for “the most efficient implementation of Value-Added Tax (VAT)” ever seen.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, said the Fund team did not exhibit “that level of enthusiasm or praise” over VAT when it met with the private sector.

He added that it was difficult to validate Mr Christie’s comments until the Bahamas had seen several consecutive months of VAT returns, and was thus able to determine the tax’s likely long-term trends.

It was only then, Mr Bowe suggested, that the country could determine whether the Government would meet its VAT revenue (and associated deficit) targets, and assess if compliance and efficiency goals had also been met.

The Prime Minister, addressing students on the College of the Bahamas (COB) journalism programme last week, said he anticipated the IMF producing a highly favourable report on the Bahamas as a result of the recent Article IV consultation meetings with the Government.

He then added: “They [the IMF] have looked at (our taxation reform) and analysed it. They have said we have had the most efficient implementation of VAT of any country. And we did it because we incorporated the private sector.”

The same IMF executives also met with the BCCEC, and Mr Bowe told Tribune Business their VAT assessment was less upbeat than the Prime Minister’s ever-optimistic prognosis.

“They didn’t indicate that level of enthusiasm or praise to say it was the most efficient they’ve identified,” Mr Bowe said of the BCCEC’s meeting with the IMF. “I think that would be a difficult statement to make at this stage.”

He explained that all the Prime Minister had to base his comment on to-date were January’s VAT returns, and tax payments, by several hundred companies that had registered to file monthly.

Compliance rates and the VAT filing system’s efficiency, Mr Bowe added, could only be properly assessed post-April, when “the vast majority” of registrants - the several thousand businesses with annual returns between $400,000 to $5 million - submitted their first-ever returns.

“Until we see the overall reform package, I’m not certain we can make that claim,” Mr Bowe said.

“We have to understand the compliance rate, as it’s [VAT] predicated on high compliance. Do we have high efficiency in terms of people filing?.

“We can take credit for the fact we were the most aggressive in terms of passing legislation and its enactment. To have it passed in August and implemented in January was quite a remarkable feat but, equally, we’re still eating the pudding. We don’t know how effective and efficient the process is.”

Mr Bowe said the IMF’s team leader, Wendell Samuel, told Chamber executives in their meeting that VAT’s initial implementation had gone “relatively smoothly”, and praised the BCCEC for helping get “far greater acceptance and concurrence

He added that much of what the IMF said, and raised, was “nothing new”, its main concern being how the Bahamas would achieve the higher gross domestic product (GDP) growth rates necessary to make a major dent in this nation’s 15.7 per cent unemployment rate.

“They felt the economy will have its challenge with growth rates; where are you going to get it from?” Mr Bowe told Tribune Business of the IMF’s position.

“It all centred on where are you going to find the stimulus to grow the economy at a faster rate than you are currently?”

Tribune Business previously revealed IMF projections suggesting that this nation needs to achieve an average 5.5 per cent GDP growth rate over the five years to 2018 if it is to both cut existing unemployment in half, and ensure all new school leavers are absorbed into the workforce.

Yet the IMF, in its statement following its March 9-20 visit to the Bahamas for the Article IV consultation, suggested that this nation’s growth between now and 2020 will peak at 2.8 per cent.

Recalling the Fund’s conversation with the BCCEC, Mr Bowe said its team noted that the Bahamas was “grappling” with the same social challenges as many OECD countries, such as healthcare costs.

Suggesting this indicated the Bahamas had to “be very careful about the ramifications” of the Government’s proposed National Health Insurance (NHI) scheme, the IMF team also questioned whether this nation could maximise returns from the multi-billion dollar investments in its hotel product and supporting infrastructure.

Mr Bowe said another topic raised was the ongoing consolidation in the offshore and private banking industries, and the “need to replace those kind of jobs and income earners”. The “glut” of distressed properties depressing the Bahamian real estate market also featured.