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Vat To Stop Business Licence Fee 'Fudging'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading realtor yesterday said the Government could enjoy a major Business Licence fee increase in coming years due to its tax reform policies, with companies no longer able to “fudge the books”.

David Morley, Morley Realty’s principal, told Tribune Business that Value-Added Tax’s (VAT) introduction, and the impact of its registration and audited ‘paper trail’ requirements, would prevent some companies under-reporting gross revenues to secure lower Business Licence fees.

He estimated that “half” the companies listed on the Government’s list of mandatory VAT registrants, who have completed the registration process, may never have had a Business Licence before - or been current - until VAT forced their hand.

Mr Morley, though, said his “biggest concern” with VAT was that the education process for the private sector and wider Bahamian society appeared to have been rushed.

He pointed out that the global experience with VAT implementation had shown that countries who took longer to educate society enjoyed smoother, and shorter, transition periods into the new system.

“There’s no doubt in my mind that revenues from Business Licences will increase slightly this year, and more so in subsequent years,” Mr Morley told Tribune Business.

“You can’t go in and fudge the books for Business Licences any more. They will go in and look at your bank statements. I suspect the Government will see an increase in Business Licence fees because of VAT.”

Mr Morley in effect is pointing out that VAT’s nature and self-enforcing mechanisms, combined with the Government’s efforts to better link compliance with all its taxes via a Central Revenue Agency, should yield greater revenues in several taxation areas.

With the Government now able to assess the monthly ‘goings on’ at VAT registrants via their returns, the well-known realtor indicated it will also be able to use its investigative powers in relation to the new tax to cross-check what it is receiving from other revenue sources.

“I bet you that half of them never had a Business Licence before,” Mr Morley said, in reference to the 900-1,000 business strong list of completed mandatory VAT registrants published by the Government yesterday.

Another factor likely to drive an increased Business Licence fee take for the Government are prior reforms to this process itself, which require rental property landlords to obtain such a licence.

Mr Morley told Tribune Business earlier this year that this was likely to create an unexpected revenue windfall from rental property landlords, who are now rushing to comply with Business Licence Act amendments.

He explained then that uncertainty over whether landlords with rental income properties needed a Business Licence had existed from the Act’s inception, and was only clarified by the amendments two years ago when the Government consolidated its licensing regime into one.

“You have circumstances where landlords did not historically have Business Licences,” Mr Morley said. “The way the Act is written now, anyone with a rental property they’re getting income from has to pay the Business Licence fee.

“I told John Rolle [the financial secretary] and Michael Halkitis [state minister for finance] that the increase in revenue due in the next year from rental income properties is something they never probably budgeted for.”

Mr Morley yesterday said he and his company were working “on behalf of a lot of clients, getting Business Licences for them before they can register for VAT”.

He recalled how one lady’s “chin almost hit the ground” when he informed her that, as a duplex owner who rented half that property out, she was supposed to have a Business Licence.

“My biggest concern in this whole matter,” Mr Morley told Tribune Business, “is I just wish the Government had given the time to educate the businesses and public on VAT before it comes into effect.

“In other countries, longer education periods correlated with shorter transition periods. And shorter education periods correlated with longer transitions.”

The Government will argue that since it published its tax reform ‘White Paper’ in February 2013, the Bahamas has had the best part of two years to get to grips with VAT.

Yet the final 7.5 per cent model was only finalised at the May Budget this year, and education efforts took several months to get going before really hitting their peak.

Comments

The_Oracle 5 years, 8 months ago

But Mr. Morley, this is exactly what VAT is for, to uncover the fudged Bahamian way of doing business, not all i must stress, but most, their books are their own, their profits are theirs, their losses kept private, their costs evaded. VAT is designed to give the Government and its creditors the view of assets, profits and markups that they have never had! I do believe the Government is in for a nasty surprise, as the honest business operations could only be barley profitable in this economic environment. In all the VAT examples Government has given, their assumptions showed 20% then 50% markup, an impossible insolvent scenario. 80 to 100% markup would be the norm, and even higher!

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asiseeit 5 years, 8 months ago

One must remember government is run by lawyers who have no clue about business. One also wonders if they understand education and the importance of it for the Nation, not just themselves?

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