By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Companies will be “in peril” of non-compliance with Value-Added Tax (VAT) if they are not given enough lead time to implement the required IT/accounting systems, a top insurance executive has warned.
Patrick Ward, Bahamas First’s chief executive, told Tribune Business that firms registering to pay VAT needed to be “absolutely certain before year’s end” of the specifics relating to how they should administer the tax’s collection and remittance.
His voice, adding to the calls for the Government to immediately publish its VAT legislation and regulations, came as a former Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chief executive branded its tariff-free concessions offer as meaningless.
The Government, in recent presentations by Michael Halkitis, minister of state for finance, and others has promised to allow companies to import equipment necessary for VAT’s implementation duty-free.
This has been touted as alleviating compliance costs for Bahamian businesses, especially medium-sized firms and those close to the mandatory $100,000 registration threshold.
However, Winston Rolle told Tribune Business that since the main item required by the private sectors - computers - were already free from import duties, there was “no substance” to the Government’s seemingly generous offer.
“I found it strange to read in the press that the Government was giving duty-free concessions for VAT,” Mr Rolle said, “because the basic thing they need is proper accounting systems.”
From a software perspective, Mr Rolle said compliance would be relatively easy, as “anything that was in the market for the past 10 years”, including Quick Books, had components to deal with VAT.
Pointing out that the bulk of VAT administration costs would be incurred “at the back end”, Mr Rolle said of the hardware requirements: “The only thing people need are computers, which are duty-free already.
“It [the Government’s offer] may sound good to the public, but it really has no substance to it.”
Meanwhile, Bahamas First’s Mr Ward called for the Government to account for the fact that the private sector needed adequate time to test any IT and system changes they were required to implement for VAT.
“I think the Government needs to be aware of the lead time to implement changes, particularly from an IT perspective, because it takes time to programme any changes for a tax, either from an input or output perspective, and these things are not very easy to implement,” Mr Ward said.
Bahamas First and the rest of the Bahamian property and casualty industry recently discovered that rather than be ‘exempted’ from VAT, they will now have to levy it on consumer premiums and register to pay it to the Government - unless the Christie administration reverts to its initial position.
Mr Ward added, though, that insurers and other likely VAT registrants “want certainty” over how to implement any specific changes the Government’s tax reform centrepiece will require.
Software and other IT system-related changes had to be tested, in order to produce the required financial statements, all of which will take time.
“The closer we get to the implementation date of July 1, 2014, the worse off we will be from a planning perspective,” Mr Ward told Tribune Business.
“We need to be absolutely certain before the end of the year. Anything beyond the end of the year will put us in peril of not being able to comply.”
The Government has missed several deadlines for releasing the VAT legislation, regulations and associated Tariff Schedule. These key documents were first set for release in the summer, before the deadline was pushed back to September, and then early October.
Ministry of Finance officials confirmed to Tribune Business earlier this week that they had finished their work on VAT, and the matter was now before Cabinet for a policy decision.
However, the Government is now in danger of missing its early October release deadline, and there are now just eight-and-a-half months to go before VAT is to be implemented (and roughly eight working weeks this year).
Mr Rolle, too, expressed concern about whether the Government would hit its July 1, 2014, implementation deadline for VAT.
“I still don’t see us doing it in eight months’ time,” the former BCCEC chief executive, who is now principal of his own business, Bahamas Technology Solutions, told Tribune Business.
“No one knows anything about it and it’s coming in eight months. It’s going to be a big challenge. It’s a cultural change for us Bahamians, and a cultural change for businesses, and there will be casualties, unfortunately.”
Mr Rolle described the “major change” as being those businesses that previously did “not have to worry about taxes or true accounting”, and who would not have to look for back office personnel and systems.
Arguing that it was “more of a challenge to track NIB than VAT” from a software perspective, Mr Rolle added that there was insufficient detail presently available for accountants to advise their corporate clients.
“The main thing is the service and expertise to set it up correctly, and that’s going to come from the accountants,” he said. “Most of the work will be done on the back end with the accountants.
“It all depends on how many businesses have these systems in place. It would surprise you; there are a lot of businesses out there that do not have proper systems in place to track their activities.”
Comments
B_I_D___ 10 years, 5 months ago
Epic disaster brewing if they intend to keep the July 1st kick-off...just saying...
The_Oracle 10 years, 5 months ago
Government cannot answer question, as they do not have the answers. Thus far all closed door discussions have been largely theoretical, and pushed by external forces. Their "Paper", if and when released, will pose more questions again, and give few answers. No one in government can think through the real world ramifications, they do not operate there, they skim, ride, meddle and constrict. but you can bet the private sector can and will, and will adjust their business models accordingly!
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