By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The proposed Value-Added Tax (VAT) assessment process could “potentially cripple a business” if has to pay an inaccurate sum to the Treasury for months, creating a “huge potential injustice”.
The Coalition for Responsible Taxation, in an assessment that focuses just on the draft VAT Bill and regulations, warns that the Commissioner’s powers to deem a company’s tax return inaccurate - and require it to pay a higher sum - would create an “overly burdensome” impact for the business in question.
The Coalition assessment, published last month, also implies that the appeals process for a company challenging a revised assessment of its VAT return needs to be better defined and more transparent, especially as appeals will be heard by the same agency that rendered the initial verdict.
Under the draft VAT Bill and regulations, the Government’s tax or VAT commissioner can examine a company’s returns and, if he/she believes an incorrect sum has been paid, can require the registrant to pay more.
And, while Bahamian companies can appeal the Commissioner’s assessment, this is a process that could take months and, ultimately, involve the Revenue Court. In the meantime, businesses will still have to pay the revised, higher VAT sum every month.
“The accuracy of the VAT return and review by the Commissioner are particularly important, as the potential injustice associated with an error in relation to the same is huge,” the Coalition, which represents the bulk of the Bahamian private sector, warns.
“There is a right of appeal; however, the registrant must pay the assessment before they are entitled to appeal the same. Requiring a registrant [company] to pay up additional funds, especially where this is potentially in error in order to appeal to the same agency that gave the assessment is overly burdensome.”
The Coalition added that the draft Bill and regulations classified the failure to pay the ‘revised assessment’ demanded by the Commissioner as ‘a very serious offence’.
And, outlining further concerns with the process, it said: “The process for appeals can result in a registrant, who will have paid assessed funds, waiting six months with no response from the Commissioner or Appeals Panel, only to have to appeal to the Revenue Court.
“If we consider the registrant who has been assessed inaccurately, and is required to continue to make erroneous, excessive payments for up to a year, this can potentially cripple a business.
“Consideration should be given to the registrant simply being required to continue filing its VAT Returns and defer payment of the assessment until a final determination has been made.”
Elsewhere, the Coalition called on the Government to publicly release the Bills that will provide the legislative foundation for the Revenue Court and Central Revenue Agency (CRA), arguing it was vital businesses and consumers understood how these bodies functioned prior to VAT implementation.
Explaining why this was necessary, the Coalition said: “The VAT legislation envisions the administration of other fiscal laws by the Central Revenue Agency, and also makes reference to refunds [of VAT] being applied in order of priority in reduction of any tax, levy, interest, fine or penalty payable by the claimant under other Acts administered by the CRA.
“It is important that persons have sight of the Central Revenue Agency Act and regulations to fully assess and understand the administration and implications of the VAT legislation.”
The Coalition also reiterated its call for the Government to abandon plans for companies to file their VAT returns and payments monthly, arguing that this would “further compound” the increased administrative burden on businesses from the new tax.
The Government, via its VAT co-ordinator, Ishmael Lightbourne, has already rejected this on the grounds that it needs the regular cash flow monthly filings will provide, but the Coalition is nevertheless persistent.
“We are of the view that the requirement to file VAT returns monthly is too onerous on the majority of businesses in the Bahamas, and are advised that other jurisdictions, such as the UK, also allow for quarterly filings and, in some instances, annual filings,” it said.
“Consideration should be given to quarterly filings, as this would reduce the burden on a business which needs to ensure VAT returns are accurate, and ensure funds in connection with such filing period are paid.”
The Coalition also called for the Government to appoint a VAT Ombudsman or Adjudicator, suggesting this would act as a ‘check and balance’ to the broad powers the legislation hands to the Commissioner and his officers.
It urged that Rules be established prior to VAT’s implementation to govern the circumstances in which the Commissioner and his officers could access banking records, and both business premises and homes. In both cases, the private sector body said a warrant should be obtained beforehand.
“Power is also granted to confiscate items from such premises, inclusive of computers and other items that could severely hinder the operations of a business,” the Coalition said.
“The possibility for infringement of an individual’s basic rights, the effect of which may ruin an individual’s livelihood, demands that the Government is sufficiently certain that those given such powers are appropriately trained in the exercise of the same.”
The Coalition added that an Ombudsman, supported by legislation, could investigate complaints from firms and Bahamians believing they have been treated unfairly in relation to VAT, Customs duties and real property tax assessments.
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