By NEIL HARTNELL
Tribune Business Editor
A well-known QC yesterday said he is mulling whether to challenge the Government’s plans to prevent delinquent Value-Added Tax (VAT) payers from leaving the Bahamas before the legislation even becomes law.
Fred Smith QC, the Callenders & Co attorney and partner, warned that if the Government succeeded in getting Section 64 in the revised VAT Bill on to the statute books and enforced it, it would soon seek to apply similar ‘travel bans’ to defaulters on other taxes.
Arguing that Section 64 was akin to something “totalitarian dictatorships” would seek to implement, Mr Smith backed private sector executives who had warned it violated freedom of movement provisions in the Bahamian Constitution.
“I will immediately bring an action for a declaration that it is an unconstitutional provision in the law,” Mr Smith told Tribune Business, when asked what he would do if Section 64 was ultimately included as is in any VAT Act.
“I might even sue beforehand,” he added. “I am considering suing before it comes into effect. I call on anyone who believes in freedom and democracy to protest and oppose this horrible provision.”
As revealed on Monday by Tribune Business, the new Section 64 in the revised VAT Bill would allow the VAT Comptroller to prevent delinquent taxpayers from travelling until they pay off their liabilities in full or agree a settlement/payment plan that is acceptable.
The legislation states that persons owing the Government VAT monies “may not leave, or attempt to leave, the Bahamas for an indefinite or prolonged period of time” - although it does not attempt to specify the duration that would meet this criteria.
“Where the Comptroller has reasonable grounds to believe that a person liable to pay tax outstanding under this Act may leave the Bahamas for an indefinite or prolonged period without paying such tax, [the Comptroller] may] issue a certificate in the prescribed form to the Commissioner of Police and the Immigration director, requesting the Commissioner and director respectively to take such steps as may be necessary to prevent the person from leaving the Bahamas” until due payment is made, the revised Bill states.
Those who attempt to flee the Bahamas without making due payment will face either a $100,000 fine or imprisonment for up to a year.
Section 64 appears designed to prevent foreign owners of Bahamas-based businesses, as well as Bahamians, from running away from their VAT liabilities, but it could well spark legal action of the kind promised by Mr Smith.
Analysing Section 64’s impact as is, Mr Smith said; “Every Bahamian, permanent resident, work permit holder, and their children and families, can be stopped at the border and prevented from travelling - to go on vacation or conduct business - simply because it is alleged that they owe VAT.”
This, he added, was exacerbated by the “vagueness” of the ‘indefinite or prolonged period of time’ wording, and the QC added: “There are no rules or boundaries, and excess and abuse will reign supreme.”
And Mr Smith quickly warned that, if it was successful under VAT, the Government would likely extend the ‘travel ban’ to cover defaulters on other taxes.
‘The idea of being able to stop people from travelling because of alleged arrears of taxation under VAT means the Government can extend this to arrears of real property tax, National Insurance Board contributions, Customs Duties and real property taxes,” Mr Smith told Tribune Business.
“If this legislation applies to one tax, it can apply to any tax, and this kind of dictatorial approach to government will make Bahamians prisoners in their own country. If this clause is permitted to stand, each successive government will extend it to every form of taxation.”
Mr Smith added that Section 64 would effectively make Bahamians and residents “slaves of the taxman, who will be judge, jury and executioner all in one.
“Once they stop us from travelling, does that mean they’ll take us into custody until we pay the taxes? Where will it end?”
Mr Smith added that the Bahamas appeared to be “going backwards as a democracy, instead of forwards”, and warned that freedoms were often eroded by stealth, one stage at a time, if governments were allowed to get away with the first move.
Gowon Bowe, the Tax Coalition’s co-chair, told Tribune Business earlier this week that the restriction contemplated by Section 64 would likely violate constitutional rights relating to a person’s ability to move and travel freely.
He added that it had been “a sticking point” in the initial November 2013 draft legislation, and had now been ‘broken out’ and stated more explicitly in the revised legislation tabled in the House of Assembly last week.
And Mr Bowe, a PricewaterhouseCoopers (PwC) accountant and partner, said imposing restrictions on a person’s ability to travel should be the sole preserve of the judiciary and Bahamian court system, not a tax authority such as the proposed VAT Department.
“I am not sure that will stand constitutionally. It would run against movement and free movement,” Mr Bowe told Tribune Business.
“The focus should be on prosecuting those individuals, with their ability to travel restricted only by the courts. That should be purely a court function; that shouldn’t be the ability of the tax authority to restrict a person’s movement.”
Suggesting that the focus should be on prosecuting VAT delinquents, not taking away their travel and movement freedoms, Mr Bowe said the world was “too much of global society to impose something as outdated as that”.