'Job Half Finished' Over Dorian Zone Tax Breaks
By NEIL HARTNELL Tribune Business Editor email@example.com
The Abaco Chamber of Commerce's president yesterday urged the Government to "revisit" its decision to keep VAT on services in the Dorian-hit islands, arguing it had left "the job half finished".
Ken Hutton told Tribune Business that removing VAT from the bills charged by contractors and other repair professionals would give residents and businesses in both Grand Bahama and Abaco the "little bit of breathing room" that is critical to rebuilding efforts following the Category Five storm.
While praising the Government's economic recovery zones as "definitely on the right track" when it came to providing a post-Dorian recovery platform, Mr Hutton said persons in both islands would still be exposed to paying the 12 percent VAT levy on the likes of insurance and medical bills.
Calling for services to be treated as VAT-free for the zones' full seven-month duration, the Abaco Chamber chief said the current set-up meant that homeowners and businesses will still be fully taxed on providers' labour and other costs while all reconstruction materials will totally exempt.
"That is something I think we need to revisit," Mr Hutton told Tribune Business of the Government's decision not to include services in the zones' tax breaks. "In particular, in a tourist-centred or service-centred economy like Abaco, it's one thing to rebuild but it's another thing to earn a living here.
"Services is definitely one of the things - everything from construction to restaurants and taxis. We need to have a little bit of breathing room for the interim; the same period of time. It's also going to affect things like insurance bills and medical bills.
"You may save VAT and duty on the construction materials, but you don't save it on the intermediaries (labour and service providers)," Mr Hutton added. "I think it's important. We need a little bit of breathing room to get this place back up and running. Having it solely for the materials and not the services is really job half finished."
K Peter Turnquest, deputy prime minister, in unveiling the Order that gives effect to the recovery zones, confirmed that services "are not included" among the items that will receive waivers from VAT and other taxes over the seven-month period that ends on June 30, 2020.
While the tax breaks will only apply to physical goods, he conceded that "not every single product is on the list of approved items". Mr Turnquest said so-called 'sin' goods, such as alcohol and tobacco, together with luxuries such as chocolate and candy, have not been deemed fit for inclusion.
"Indeed, not every single product sold by specialty businesses will be covered under the Order, plus services are not included under the Order," he confirmed. "However, the list is very expansive and was created to take care of the immediate and urgent needs of the people affected by the storm to rebuild their homes and restore normalcy to their lives.
"The expansive list includes building supplies, hardware supplies, household furniture, furnishings and appliances, beds and bedding material, air conditioning units, plumbing and electrical fixtures. The list also includes clothing, personal hygiene products, unprepared food, medical supplies and cleaning supplies."
Mr Hutton said there was "no doubt" that the recovery zones' Order represented much-needed financial relief for those struggling to rebuild in Dorian's wake, and he voiced optimism that the newly-created Disaster Reconstruction Authority that took effect on December 1 will help "eliminate red tape" that has impeded reconstruction efforts.
"There's definitely been progress, but there are a lot of people going on three months that are not seeing it, and it could have been a lot further along," he added. "We need a further shot in the arm. I'm hoping the elimination of red tape and getting things going will be that further shot in the arm."
Asked to identify the major bureaucratic obstacles hindering the recovery effort, Mr Hutton replied: "It has a lot to do with VAT; who has been charging it and who has not been charging it. I will give Customs a lot of kudos for helping to streamline the process of getting materials in.
"A lot of homeowners have questioned as to whether they qualify [for the tax relief], and a lot of that has been clarified today. Our priority has to be getting that airport open to international flights so second homeowners have an easy way to get back here and stimulate their part of the economy.
"There's a tremendous amount to be done," he added. "It seems like a long time, three months, when you're here, but in the major scheme of things three months is not that long. We need to get that investment back or get those donated funds back on the table so they can be accessed by the Disaster Reconstruction Authority.
"We understand funding from the central government is going to be a challenge, and we have to be looking at getting other sources of funding in here internationally, and through charities, non-governmental organisations (NGOs) and other sources."
Mr Hutton added that Customs and the Immigration Department had "done a very good job of being able to control who comes in and what's coming into the zones, at least in Abaco. We're just waiting for this Disaster Reconstruction Authority to cut its teeth and see what happens".
The Minnis administration has teamed with United Nations Development Programme (UNDP), and the US and UK governments, to stage a pledge conference on January 13, 2020, in Nassau to mobilise private sector financial and technical support for recovery efforts following Hurricane Dorian.
The conference is intended to galvanise support from the private sector, high-net-worth individuals, other governments and donors who have expressed interest in assisting with the rebuilding process. And it is also a sign that the Government cannot finance everything by itself, especially since this nation's categorisation as a high income country denies it access to grant funding.
Denise Antonio, the UNDP resident representative to The Bahamas, explained: “The high-income classification for the Bahamas means that the Government will have to mobilise private sector or other donor financing to pay for its short and medium-term recovery needs.”
She added that this was necessary because The Bahamas has limited access to overseas development assistance and concessional financing.