The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s plans to prevent delinquent Value-Added Tax (VAT) payers from leaving the Bahamas until their bills are settled was yesterday branded unconstitutional, and likely subject to legal challenge if ultimately passed into law.

Gowon Bowe, the Tax Coalition’s co-chair, told Tribune Business that such a restriction 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 of the new VAT Bill’s Clause 64.

“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away their travel and movement freedoms, Mr Bowe said the world was “too much of global society to impose something as outdated as that”.

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.

This 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 on constitutional and human rights grounds.

However, others backed Mr Bowe’s view that this section - if passed into law by Parliament - will ultimately be challenged in the Bahamian court system on constitutional grounds.

Fred Smith QC, the Callenders & Co attorney and partner, who is a well-known human rights advocate, said of Section 64 in the VAT Bill: “They can’t do that. That’s really draconian.”

And Robert Myers, the second Coalition for Responsible Taxation co-chairman, expressed “surprise” to Tribune Business when informed that the ‘travel restriction’ section was still in the Bill.

“That was one we had issue with,” he said. “I’m surprised it’s still in there. There’s no way that will move through [Parliament and the private sector feedback process] unchallenged. You can be sure it will be challenged/

“It was challenged previously by the Coalition. Seizing my passport because you think I’m a tax cheat? That I have an issue with. You must be proven guilty before they start restricting your passport.”

But both Mr Bowe and Mr Myers said they had no difficulty with the revised VAT Bill’s Clause 66, which allows the VAT Department to take a lien over any delinquent taxpayer’s assets that are within the administration’s possession.

The Bill says from the date VAT monies become due, and until they are paid, the VAT Department has “a lien on the assets in the possession or control of the Customs Department or any other government entity”.

This lien extends to assets belonging to persons ‘related’ to the delinquent taxpayer, if the Comptroller “reasonably believes” the latter beneficially owns them or has merely transferred them to conceal their ownership interest.

Mr Bowe said this had again ‘been broken out’ more clearly in the new Bill, having also been included in the November 2013 draft legislation.

“That is a positive one that will start to enforce some fear on enforcement,” he told Tribune Business of Section 66. “There is a direct recourse if people break the law blatantly.

“If the Government sells some of the property that has been seized - land is a difficult one if there is no liquidity in the market - but if you think about vehicles, business equipment and the ability of the Comptroller to seize them and sell them to settle a tax bill, that’s a positive one.”

Mr Myers, too, said he had “no issue” with Section 66, and suggested similar “far reaching” sanctions needed to be imposed for other taxes, such as real property tax, that lacked enforcement “teeth”.

Suggesting that such measures were “of no consequence to the law abiding”, Mr Myers added: “It may slow you down, but does not bother me because I know I pay my taxes.

“If it’s proven that I’m a tax cheat, seize my assets. I have no problem with that; most people will have no problem with that.

“When people do not comply, the rest of society has to pay for the failures of the few. We end up paying the tax for those that don’t pay. I’m tired of paying other people’s taxes.

“Make it fair and equitable and everybody pays. Let them run around free and carry on what they’re doing is only going to lead to a lawless society.”