The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman yesterday questioned whether the Government was “putting the cart before the horse” in failing to establish the long-promised Central Revenue Agency (CRA) before implementing Value-Added Tax (VAT).

K P Turnquest told Tribune Business that the failure to establish the CRA before January 1, 2015, raised doubts over VAT’s “transparency”, and whether the new tax would be enforced uniformly and fairly.

The Christie administration has opted to create a VAT Department within the Ministry of Finance, headed by a VAT Comptroller, to administer and collect a new tax projected to raise $400 million gross in its first fiscal year.

The revised VAT Bill also contains a new clause designed to prevent the Minister of Finance and other politicians from interfering with the VAT Comptroller and his officials in their enforcement activities, but Mr Turnquest is not satisfied.

And John Rolle, the Ministry of Finance’s financial secretary, while conceding that the CRA will not be established by January 1, 2015, has promised that its creation remains a key government objective - with the VAT Department ultimately merged with the so-called ‘Inland Revenue’s’ Business Licence and real property tax responsibilities.

Yet Mr Turnquest told Tribune Business: “While we’ve heard a lot about the Government being ready, the CRA is not going to be ready for some time, and they’ve opted to establish a VAT Department in the Ministry of Finance.

“The critical thing about making this [VAT] reform work is having an independent or semi-independent agency that is able to collect the tax properly, fairly and transparently.

“The fact this remains in the Ministry of Finance leaves everyone feeling a little suspicious, as they have not done a very good job of being transparent in the past,” Mr Turnquest added.

“We want to make sure it’s not just the people on the outside looking in that are checked, but that those in the know are subject to the same rules.

“The worst thing that can happen is we start off with a system that is abused from the outset. Once it goes wrong, it’s very difficult to put it right.

“Are we putting the cart before the horse? Should we set up the CRA, train people and departments, and then add VAT to that, so we have a competent tax and compliance regime?”

Mr Turnquest added that the Bahamas was attempting to implement VAT within four-five months of passing the necessary legislation, when the global average was for 18-24 months to elapse between these two dates.

Suggesting that the Bahamas’ VAT’s roll-out would be anything but smooth, the FNM MP for east Grand Bahama said: “We can only go by experience.

“The bureaucracy of government tends to turn very slowly, the individuals need to be trained and put in place, and are not there at this point, so to get all this going in four-five months is a very big ask.”

Tribune Business understands that the Government has already ramped up its internal and external preparations.

This newspaper was told by well-informed sources that foreign executives from the KPMG accounting firm are already in the Bahamas training VAT Department personnel, and helping to write ‘guidance notes’ for 15-16 different industries.

And the VAT Bills have been in the public domain since November 2013, so preparation time has been a little more than four-five months.

Mr Turnquest, though, questioned whether the Government would be lenient in the initial post-VAT implementation stages with businesses that were “unknowingly” non-compliant, given the “stiff” penalties that could be levied.

“The issues are the changes in the tariff rates, how the law will apply, and how do you comply,” the FNM MP added.

“Is there enough time to educate not only the business community that has to implement and comply with this system, but what about the consumer public knowing their rights and all the intricacies so they can protect themselves?”

Mr Turnquest told Tribune Business that passing the VAT legislation through Parliament was “the easy part”, with the “follow-up, commitment” and recruiting and training of the right people now the key tasks for the Government.

He also expressed concern that VAT would not be consistent with Freeport’s ‘bonded goods’ regime and reputation as a ‘free trade zone’, suggesting that Grand Bahama Port Authority (GBPA) licensees will have to pay VAT on their imports up front and then file to reclaim these sums from the Government.

“That’s not the way the Hawksbill Creek Agreement is supposed to work,” Mr Turnquest told Tribune Business.