Bahamasair discounts undermine local retail

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BAHAMASAIR has been accused of undermining local retailers through its 'shop in Florida' specials, with Customs facing an "almost impossible" task to prevent tax evasion and smuggling.

The Bahamas Federation of Retailers (BFR), in again calling for the Government to make local apparel, shoes and fashion retailers price competitive through duty elimination, argued that other corporate elements - especially the banks - were reinforcing the "entrenched cultural mentality" that shopping abroad is better.

"The Bahamas faces a unique predicament in retail based on its proximity to the US," the Federation said in a recent statement. "Unlike other Caribbean islands and destinations with more challenging logistics, the US is a mere 30-minute flight away, and shipping from online or a Florida based store is relatively cheap for the individual end consumer.

"Additionally, smuggling is rampant whether via a cargo vessel, private yacht, commercial or private airplane, or corrupt freight forwarders, as has been the case in recent times. Bahamasair, our national airline that uses millions of our tax dollars yearly, advertises 'shop in Florida' specials with discounted rates on the number of bags Bahamians can bring back.

"When those purchases in those bags are apparel, fashion accessories, shoes or other small and easily portable gift items, much of what is brought in from these 'shop in Florida' trips are claimed as 'personal effects' at the border and, understandably, it is almost impossible for Customs to police. In addition to the airline, Bahamian-based banks regularly advertise loans and credit cards for 'shopping abroad'. That is how entrenched this mentality is in our culture."

The Federation argued that the Bahamas' 'archaic' duty structure made it "impossible" for Bahamian apparel and fashion merchants to price at competitive levels, resulting in lost commerce and government taxes as Bahamians increasingly shopped online or abroad.

"In most cases, the Government then fails to collect the duty and VAT that otherwise would have been collected if they had shopped locally with Bahamian-owned and operated businesses that employ people locally and pay their taxes," the Federation added.

It argued that eliminating import duties for apparel, shoes and fashion accessories in the Bahamas "will not only improve the competitive ability of local Bahamian wholesalers and retailers, but will also have the long-term benefit of boosting domestic consumption, thus improving private sector employment as well as VAT revenue to the Government".

"The more money spent in the Bahamas on retail goods, the more money to go around in our economy, the more jobs created, more taxes generated, less government spending on social services, and the greater our GDP growth," the Federation said.

The BFR estimated that the Bahamian economy loses roughly $2 billion worth of business to online shopping and/or Florida, and a significant percentage of that amount goes completely untaxed by the Government due to smuggling by Bahamians and expatriate residents alike.

"The country is bleeding not just domestic business and the employment that business generates, but millions upon millions in tax revenue as well," the Federation warned. "The stark reality is that our archaic duty structure pushes local shelf prices beyond consumers' expected online and/or Florida prices, which can be accessed and compared at the push of a button on any smartphone.

"The problems facing the global retail sector are only exacerbated in the Bahamas where the high cost of doing business and high import duties further disadvantage local retailers. High Customs duties put undue pressure on the pricing structure, which burdens consumers with unnecessarily high prices.

"Additionally, the high import duties are extremely prohibitive to the retail sector's ability to bring in sufficient assortments without taking huge inventory risks. This again pushes people to shop abroad as they complain that choice is limited locally. Without these high import duties, local apparel and shoe retailers could charge a regular margin and thus mark-down and turn over inventory on the standard fashion cycle bringing in greater updated assortments. However, the current import duty rates make it impossible to price at competitive levels or carry a sufficient selection of merchandise."