NASSAU, BAHAMAS — Fidelity Bank (Bahamas) Chief Executive Officer Gowon Bowe says recent adjustments to VAT policy are creating unnecessary hurdles for compliant businesses while failing to achieve meaningful tax redistribution.
Bowe acknowledged that authorities are right to close loopholes exploited by “unscrupulous businesses,” but he said the current approach has gone too far by restricting VAT input credits on capital projects exceeding $1 million without prior approval from the Department of Inland Revenue.
“What was introduced was this concept that VAT inputs can no longer be claimed on capital projects and in excess of a million dollars without the approval of Inland Revenue,” Bowe said. “And we’ve heard businesses that have expressed that they have effectively denied what I’m going to call ongoing businesses that have revenue streams that are charging customers VAT on a daily basis from the input credit.”
He explained that VAT was designed to allow businesses to offset taxes paid on inputs against taxes collected on sales, preventing cash-flow strain and double taxation.
“You want businesses to invest,” Bowe said. “So you allow them to not have to pay the tax up front, but pay it as they earn revenues. And that’s the age-old principle that has been in existence for VAT.”
According to Bowe, denying or delaying legitimate VAT refunds does not reduce the tax burden—it merely shifts it.
“Businesses, how do they make money? Passing it on to the end consumer,” he said. “So as opposed to creating what I’m going to call a maze of tax initiatives that still end up with the burden being on the back of the citizens, I think we need to stick to the transparency, the clarity and the simplicity.”
Bowe traced the current challenges to years of policy inconsistency. When VAT was first introduced at 7.5 percent, he noted, there were no exemptions. Subsequent administrations increased the rate while introducing exemptions, reducing the effectiveness of the increase. Later reforms eliminated exemptions and reduced the rate to 10 percent, only for further adjustments under political pressure related to the cost of living.
“You actually did not redistribute wealth,” Bowe said. “The persons who could afford to pay the full 10 percent were given a benefit of five percent, and you have not redirected the resources as you intended.”
He added that repeated changes have made the system more complex for merchants without delivering meaningful relief to lower-income households.
“You bastardise the system,” he said. “You now made it more complex for merchants, and you actually did not redistribute wealth.”
Bowe argued that tax reform remains necessary but should focus on fairness and redistribution rather than piecemeal measures.
“The most among us pay relatively low taxes compared to the least among us,” he said. “There needs to be a redistribution, and it doesn’t necessarily need to be in the way that the IMF has suggested.”
Turning to the International Monetary Fund’s recently released Article IV Concluding Statement, Bowe described the assessment as balanced and constructive, cautioning against selective interpretation.
“The IMF report, I think, was a sober, but positive report,” he said.
He said the Fund acknowledged improved fiscal performance despite shocks from Hurricane Dorian, the COVID-19 pandemic, high inflation and elevated interest rates.
“It indicated that we have done well up to this point in time,” Bowe said, “but they are indicating that for us to achieve the objectives that we as a country have set, there are going to have to be changes still.”
However, he criticised both government and opposition for failing to produce a comprehensive national development plan that could serve as an alternative to IMF recommendations.
“If you do not have your own plan, then someone will write one for you,” said Bowe.
