By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s Business Round Table with senior corporate executives may have created a pathway for “defusing” the row over the VAT treatment of health insurance claims, one attendee said last night.

Sir Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business that while the discussions yielded no firm resolution there was a sense that the differences between the Government and health insurers may be heading in a “direction” where the two sides could yet strike “a mutual understanding”.

Other persons present at the meeting confirmed that the Government’s plans to change the VAT treatment of health insurance claims payouts was among “the main topics” discussed with Philip Davis KC and other ministers and officials present. They included Chester Cooper, deputy prime minister and minister of tourism, investments and aviation; Michael Halkitis, minister of economic affairs; and Simon Wilson, the Ministry of Finance’s financial secretary.

The private sector attendees included Julian Rolle, BAF Financial’s managing director, and a key player in the health insurance industry’s push back against the VAT treatment change. “On particular matter, I think it’s fair to say the way for defusing it appears to have been laid,” Sir Franklyn told this newspaper, later confirming he was referring to the claims payouts situation.

“Nothing was concretised, but direction was given that something may be possible. I think it was a constructive dialogue. There’s a sense that following the conversation that it is possible, probable, that some form of mutual understanding appears to be a possibility.”

Presently, persons with private medical insurance only pay VAT on the co-pay or deductible, which is typically 20 percent of the care or medication costs. However, the Ministry of Finance and Department of Inland Revenue are altering the VAT treatment of health insurance claims payouts such that insurers will no longer be able to recover the 10 percent levy by claiming it as an ‘input’, which presently allows them to net it off against the output VAT paid on the premium.

In practice, patients - as the end-consumer - will from April 1, 2023, also become responsible for paying VAT on the 80 percent share of medical costs paid by insurers. The latter will almost certainly pass this sum on to consumers, with the end result being that the proportion of medical costs borne by patients will now increase as they will be obligated to pay 100 percent of the VAT incurred.

The Ministry of Finance, though, says the change is necessary because allowing insurers to reclaim VAT on claims payouts breaches the law and is depriving the Public Treasury of millions in vital revenues. It is arguing that it is “clearly against the VAT Act” for insurers to claim back the 10 percent levy on medical claims payouts, with one audit of an unnamed health insurance provider in 2021 showing it had “received over $20m illegally” through this mechanism.

The ministry, and the Department of Inland Revenue’s, position is that VAT is payable on medical insurance claims payouts because these are being made on behalf of the end-user - the consuming patient - and thus should attract the tax. Health insurers are currently claiming this as ‘input’ VAT, offsetting it against their ‘output’ tax on premiums and effectively allowing the likes of Colina, Family Guardian and CG Atlantic to claim it back from the Government.

However, insurers arguing that the Ministry of Finance is wrong to treat the payment of clients’ medical expenses and the care received from providers as two separate services. Its case is that since health insurance and medical services are both VAT-able, health insurance claims should continue to be tax-deductible for health underwriters, otherwise the Government would be knowingly applying two layers of VAT.

The ease of doing business in The Bahamas was the other major topic that arose at the Business Round Table. Sir Franklyn said it had been especially useful to have John Rolle, the Central Bank’s governor, present along with four of the six commercial bank heads - Gowon Bowe from Fidelity Bank (Bahamas); LaSonya Missick from Royal Bank of Canada (RBC); Roger Archer from Scotiabank (Bahamas); and Kenrick Brathwaite of Bank of The Bahamas.

“This provided an opportunity to get past the finger-pointing as to whether or not the Central Bank is the problem, or the banks are the problem, on the ease of doing business with reference to banking,” the Arawak Homes chair said.

Summing up the meeting, he added: “It appears as if the audience were pleased and satisfied that there was a genuine effort to engage. I think it was generally received as a genuine effort to engage. I think most people were satisfied that nothing was off the table in terms of what can be discussed and raised. I would say overall that there’s a sense that open, cordial and frank dialogue was welcome between significant participants and elements of the business community.

“It was a meaningful conversation. The point is we had an opportunity. At least there’s an understanding. There are people in the room the Government knows. It’s talking to the right people in terms of coming to an understanding on what is important or not important.”

Bank of The Bahamas’ Mr Brathwaite, meanwhile, confirmed: “The issue of the VAT and ease of doing business were the two main topics that came up..... A lot of things were said but everything is in the execution to move the country.” He added that the talks took place in a bi-partisan way, with no political influences, and were focused on what is best for The Bahamas and its economy.

Besides the banking industry’s strong presence, other attendees included realtors, David Morley and Mario Carey; David Kosoy, Sterling Global Financial’s executive chairman; Tony Ferguson, the CFAL president; Pedro Rolle, the Exuma Chamber of Commerce president and Bahamas Power & Light (BPL) chair; and Robert Sands, the Bahamas Hotel and Tourism Association (BHTA) president.