Banks ‘expected’ higher fees
Banks need to “move on and adjust” to new business license fees and the implementation of value added tax, according to Scotiabank’s Managing Director Kevin Teslyk, who has suggested that the increase is a straightforward result of an environment in which the government needs more revenue.
“Nobody likes it, but I think you have the context that everyone has to pay a little bit more if government is going to be able to raise revenue to continue and or refine its services” said Teslyk in an interview with Guardian Business.
“That’s the reality – it’s the same for our industry and our bank; there was an expectation that the government was going to require us to pay more.
“What you are seeing is differences of opinion over how its structured, the timing and such, and we’ve had numerous discussions; we’ve had an audience with the prime minister and shared all of those things. They’ve made a decision not just with respect to our industry, but all industries. It’s time to move on.”
Guardian Business was informed last week that the Clearing Banks Association (CBA) will bring up the issue of the increased business license fees again in its meeting with the Ministry of Finance this week, with the aim of “keeping the lines of communication open,” according to one banking executive.
This comes after the government came back to the CBA last month on its request for the government to reconsider the fee increase, stating that it would not change course.
Some industry insiders have expressed a fear that the fee will create a further recessionary impact as banks pass on the higher costs to consumers, and further cut back on lending.
It has been suggested that local Bahamian banks will be particularly hard hit by the higher fee, given their inability to tap into the types of economies of scale that large Canadian banks servicing the local market can.
With respect to VAT, Teslyk said he anticipates that the tax will “moderate some of Baha Mar’s growth expectations” and like many business stakeholders he added that he feels that “many unknowns” remain about the VAT plan and its impact.
Teslyk described VAT as an “extra dynamic” going into 2014, adding that everyone in business is “trying to predict what’s the net effect of Baha Mar and VAT”.
Teslyk suggested that among the greatest “unknowns” at present is how banking services will be categorized under the VAT regime – whether as zero rated, or VAT exempt, for example.
“The Clearing Banks Association [this] week are having a first level dialogue with the Ministry of Finance to give some of our perspectives around VAT as it relates to financial services. The White Paper (on VAT, released by the government earlier this year) generally talks about exempt or zero rated VAT for financial services. It doesn’t mean we wouldn’t pay VAT, but it talks about which services banks offer are VAT free; a large amount of services would be zero rated but not all.
“So that’s the kind of discussion that needs to take place because it has implications around the collection and remittance of VAT and the general kind of flow of monies into the treasury.”
However, ultimately Teslyk said the industry had “done a good job in helping [the government] to understand the implications, and the adjustments and the trade offs” and he is happy it is time to “move forward”.
The managing director said that overall he expects 2014 to be largely the same as 2013 in terms of the economic outlook, where 2013 was “a bit of a repeat” of 2012.
This is notwithstanding the fact that there are positive signs coming out of the U.S. economy which he expects The Bahamas to benefit from earlier than other countries in the region.
“The signs out of the U.S. are very encouraging,” he said. “They’re not there yet but they’re trending in the right direction on many fronts which is a huge, huge, potential influencer on The Bahamas because of the close relationship. As the markets come back The Bahamas is going to feel the positive benefit much, much more quickly than the rest of the region.”