garnelleo
08-28-08, - 09:51 PM
By TAMARA McKENZIE
Downtown business owners say they are finding it difficult to compete.
Downtown business owners who largely depend on the expenditure of tourists to pull in profits say they are finding it difficult to compete in the retail industry because of a new excise tax that was imposed in this year’s fiscal budget on certain items such as perfumes, cosmetics and leather goods.
According to the Customs Duties Investment Digest of the Bahamas, 2008/09, the excise tax on fragrances and duty-free leather goods increased from 20 to 25 percent, while the excise tax on cosmetics increased from 40 to 45 percent.
The Journal understands that such a move did not sit well with major retailers, especially those on Bay Street who have voiced their concerns to the government about the increased duty imposed on these items.
It appears, however, that those concerns continue to fall on deaf ears.
Many retailers claimed that when it comes to the sale of such goods, The Bahamas cannot compete with other tourist destinations like St. Thomas in the Virgin Islands, Cayman, and other ports of call.
General Manager of the Perfume Shop Tim Lightbourn told the Journal yesterday that because the retail price for perfumes is established in the North American market, the price cannot be changed.
He explained that when the excise tax on perfumes recently moved from 20 to 25 percent, it resulted in a larger tax increase for the retailer who had to tap into his or her profits because the retail price could not be changed.
"The problem that we face is because the cost price is the same [as the retail price], the amount of money that we make is limited because eight percent of the profit is being taken away from us and that is the difficulty," Lightbourn said.
He noted that many retailers discovered several weeks after the budget communication that some taxes had in fact increased.
"We had a meeting with [Minister of State for Finance] Zhivargo Laing and it was very cordial, but the government’s problem with any tax bill is that the only way it can be raised or lowered is by an act of parliament, which is normally only done at the time of a budget," Lightbourn said.
"That is the real problem that we face. I think they realize that they made a mistake and this should not have been done, but they just need to find a way to help us to get to the stage where they hopefully will lower it [excise tax] again, and hopefully we don’t have to wait a year to be reconsidered."
Another concerned Bay Street retailer who spoke to the Journal yesterday on the condition of anonymity said he was very concerned about the high rate of duty imposed on cosmetics, perfumes and leather goods because they were now incurring losses that could not be passed on to the customer.
"We are concerned about the duty structure because when selling duty free items, our suggested retail price is pretty much dictated to us by the vendors because that is how duty free shopping is set up throughout the Caribbean," the retailer explained.
"All other duty free destinations within the Caribbean would have the same price points as we do [in the Bahamas]. For instance, with us paying a higher rate of duty on the goods that we will now be bringing in, such as leather goods, perfumes and cosmetics, retailers would have to absorb these losses because we can’t pass them on to the customer."
"If we do, we won’t be able to compete with US retailers and we won’t truly be offering duty free prices. Secondly, we won’t be able to compete with the rest of the Caribbean as we position ourselves in the tourist market."
However, Minister of State for Finance Zhivargo Laing said it was "not likely" that the duty would be lowered before the next fiscal budget. He told the Journal that he discussed [the excise tax] matter with some retailers and had explained when a change, if any, would be made.
"Any adjustments in tariffs would very likely be done during the budget exercise, which would not commence until next year," Laing said. "I am not saying that there can’t be any amendments [to the Tariff Act] but there is not likely to be. We do budget exercise once a year and it’s unlikely that there will be any changes to any tariff in the middle of the year."
Laing could not state if any change of the excise tax would materialize in the next budget period, and such a decision, he said, was entirely up to the minister of finance, Prime Minister Hubert Ingraham. He did state, however, that because the excise tax imposed on certain retail items had been brought to the attention of the government by some retailers, they would give it some attention.
But former Minister of State for Finance James Smith explained that historically, the duty on a number of "tourist" items such as leather goods and perfumes had been reduced to "next to nothing" until the Tariff Act was amended.
"I think what happened this time around is when the Tariff Act was amended to make way for the excise tax and a rounding off took place, some of those items [leather goods, perfumes and cosmetics] got caught up in the rounding off exercise where the duty rate either went back up again or where they combined the stamp duty with the tariff rate," Smith explained.
"The effect of this would have been to literally raise taxes back on items that would have been rolled back because the merchants on Bay Street always wanted to boast that they were selling duty free items, and that is why the customs duties were taken off many of the items and the only thing remaining was the stamp tax."
"Now if the government recognizes that this was not the intended effect of the rounding exercise and they proposed to do something about it, they don’t have to wait until the budget exercise to do it," Smith advised.
"If they made a mistake like that, they could just go back and make an amendment to the Tariff Act to bring these rates back in line with whatever rate they wanted, and you don’t need a budget excise to do it – technically it’s quite easy to do."
Smith further explained that while the government clearly recognized that there was an economic slowdown, they still "boasted" that taxes would be rolled back. He noted, however, that some tax rates were increased instead.
"They [the government] can’t have a stimulus package where they deliberately roll back taxes in order to stimulate the economy and at the same time raise taxes to balance the budget," Smith said. "The effect of that is almost nil."
Meanwhile, President of the Bahamas Chamber of Commerce Dionisio D’Aguilar told the Journal Wednesday that the government likes to "hide" behind the fact that duty rates are only examined once a year. He claimed that such a policy was articulated when the Opposition raised concerns about the rate of duty being changed on the Mona Vie berry drink.
"I guess what they don’t want to do is open up this hornets nest of making adjustments because the government will get bogged down by constantly addressing the change of duty rates," Mr. D’Aguilar said.
"This will now make everybody aware that when the budget comes out in May, from about February onward, they will have to start lobbying hard to get what is needed in the budget because once it is set, that’s that."
Mr. D’Aguilar said in order for Bay Street retailers to lend some sort of "credibility" to their case, it would be "wise" for them to conduct a simple analysis of prices in the Bahamas of certain items and compare them to other jurisdictions where cruise ships berth.
"If our duty is much higher, then it just doesn’t make sense for the retail businesses to sell that product because it’s just much cheaper in other jurisdictions in the southern Caribbean," the Chamber president said. "And if that’s the case, the government would have to address this problem."
According to Mr. D’Aguilar, the main items that most tourists purchase on Bay Street are t-shirts, liquor, jewelry, perfume, cosmetics and tobacco.
"The retailers must look at these six items and determine where they fall in comparison to competing jurisdictions," he said.
http://www.jonesbahamas.com/?c=45&a=18108
Downtown business owners say they are finding it difficult to compete.
Downtown business owners who largely depend on the expenditure of tourists to pull in profits say they are finding it difficult to compete in the retail industry because of a new excise tax that was imposed in this year’s fiscal budget on certain items such as perfumes, cosmetics and leather goods.
According to the Customs Duties Investment Digest of the Bahamas, 2008/09, the excise tax on fragrances and duty-free leather goods increased from 20 to 25 percent, while the excise tax on cosmetics increased from 40 to 45 percent.
The Journal understands that such a move did not sit well with major retailers, especially those on Bay Street who have voiced their concerns to the government about the increased duty imposed on these items.
It appears, however, that those concerns continue to fall on deaf ears.
Many retailers claimed that when it comes to the sale of such goods, The Bahamas cannot compete with other tourist destinations like St. Thomas in the Virgin Islands, Cayman, and other ports of call.
General Manager of the Perfume Shop Tim Lightbourn told the Journal yesterday that because the retail price for perfumes is established in the North American market, the price cannot be changed.
He explained that when the excise tax on perfumes recently moved from 20 to 25 percent, it resulted in a larger tax increase for the retailer who had to tap into his or her profits because the retail price could not be changed.
"The problem that we face is because the cost price is the same [as the retail price], the amount of money that we make is limited because eight percent of the profit is being taken away from us and that is the difficulty," Lightbourn said.
He noted that many retailers discovered several weeks after the budget communication that some taxes had in fact increased.
"We had a meeting with [Minister of State for Finance] Zhivargo Laing and it was very cordial, but the government’s problem with any tax bill is that the only way it can be raised or lowered is by an act of parliament, which is normally only done at the time of a budget," Lightbourn said.
"That is the real problem that we face. I think they realize that they made a mistake and this should not have been done, but they just need to find a way to help us to get to the stage where they hopefully will lower it [excise tax] again, and hopefully we don’t have to wait a year to be reconsidered."
Another concerned Bay Street retailer who spoke to the Journal yesterday on the condition of anonymity said he was very concerned about the high rate of duty imposed on cosmetics, perfumes and leather goods because they were now incurring losses that could not be passed on to the customer.
"We are concerned about the duty structure because when selling duty free items, our suggested retail price is pretty much dictated to us by the vendors because that is how duty free shopping is set up throughout the Caribbean," the retailer explained.
"All other duty free destinations within the Caribbean would have the same price points as we do [in the Bahamas]. For instance, with us paying a higher rate of duty on the goods that we will now be bringing in, such as leather goods, perfumes and cosmetics, retailers would have to absorb these losses because we can’t pass them on to the customer."
"If we do, we won’t be able to compete with US retailers and we won’t truly be offering duty free prices. Secondly, we won’t be able to compete with the rest of the Caribbean as we position ourselves in the tourist market."
However, Minister of State for Finance Zhivargo Laing said it was "not likely" that the duty would be lowered before the next fiscal budget. He told the Journal that he discussed [the excise tax] matter with some retailers and had explained when a change, if any, would be made.
"Any adjustments in tariffs would very likely be done during the budget exercise, which would not commence until next year," Laing said. "I am not saying that there can’t be any amendments [to the Tariff Act] but there is not likely to be. We do budget exercise once a year and it’s unlikely that there will be any changes to any tariff in the middle of the year."
Laing could not state if any change of the excise tax would materialize in the next budget period, and such a decision, he said, was entirely up to the minister of finance, Prime Minister Hubert Ingraham. He did state, however, that because the excise tax imposed on certain retail items had been brought to the attention of the government by some retailers, they would give it some attention.
But former Minister of State for Finance James Smith explained that historically, the duty on a number of "tourist" items such as leather goods and perfumes had been reduced to "next to nothing" until the Tariff Act was amended.
"I think what happened this time around is when the Tariff Act was amended to make way for the excise tax and a rounding off took place, some of those items [leather goods, perfumes and cosmetics] got caught up in the rounding off exercise where the duty rate either went back up again or where they combined the stamp duty with the tariff rate," Smith explained.
"The effect of this would have been to literally raise taxes back on items that would have been rolled back because the merchants on Bay Street always wanted to boast that they were selling duty free items, and that is why the customs duties were taken off many of the items and the only thing remaining was the stamp tax."
"Now if the government recognizes that this was not the intended effect of the rounding exercise and they proposed to do something about it, they don’t have to wait until the budget exercise to do it," Smith advised.
"If they made a mistake like that, they could just go back and make an amendment to the Tariff Act to bring these rates back in line with whatever rate they wanted, and you don’t need a budget excise to do it – technically it’s quite easy to do."
Smith further explained that while the government clearly recognized that there was an economic slowdown, they still "boasted" that taxes would be rolled back. He noted, however, that some tax rates were increased instead.
"They [the government] can’t have a stimulus package where they deliberately roll back taxes in order to stimulate the economy and at the same time raise taxes to balance the budget," Smith said. "The effect of that is almost nil."
Meanwhile, President of the Bahamas Chamber of Commerce Dionisio D’Aguilar told the Journal Wednesday that the government likes to "hide" behind the fact that duty rates are only examined once a year. He claimed that such a policy was articulated when the Opposition raised concerns about the rate of duty being changed on the Mona Vie berry drink.
"I guess what they don’t want to do is open up this hornets nest of making adjustments because the government will get bogged down by constantly addressing the change of duty rates," Mr. D’Aguilar said.
"This will now make everybody aware that when the budget comes out in May, from about February onward, they will have to start lobbying hard to get what is needed in the budget because once it is set, that’s that."
Mr. D’Aguilar said in order for Bay Street retailers to lend some sort of "credibility" to their case, it would be "wise" for them to conduct a simple analysis of prices in the Bahamas of certain items and compare them to other jurisdictions where cruise ships berth.
"If our duty is much higher, then it just doesn’t make sense for the retail businesses to sell that product because it’s just much cheaper in other jurisdictions in the southern Caribbean," the Chamber president said. "And if that’s the case, the government would have to address this problem."
According to Mr. D’Aguilar, the main items that most tourists purchase on Bay Street are t-shirts, liquor, jewelry, perfume, cosmetics and tobacco.
"The retailers must look at these six items and determine where they fall in comparison to competing jurisdictions," he said.
http://www.jonesbahamas.com/?c=45&a=18108