The Tribune

By NEIL HARTNELL

Tribune Business 
Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) will create a “positive shake-out” in the Bahamian private sector, the Tax Coalition’s chairman yesterday suggesting it would help to eliminate “corrupt and unethical business owners”.

Gowon Bowe told Tribune Business he had “no empathy” for companies and entrepreneurs who had knowingly been evading due taxes, and were now complaining about having to become ‘current’ to meet VAT registration requirements.

Arguing that such businesses should not be operating, as they were gaining an “unfair advantage” over legitimate taxpaying competitors, Mr Bowe said VAT’s introduction could now help the latter to flourish.

“I agree there will be a shake-out, but this will be a good shake-out, a positive shake-out,” Mr Bowe told Tribune Business in relation to VAT’s impact.

He was responding after several private sector sources suggested the Bahamas could witness increasing business closures and lay-offs in the run-up to the January 1 implementation date, as their owners decided not to ensure VAT-related compliance and implementation costs.

While these might not cause business closures by themselves, Tribune Business’s contacts said they would further aggravate the problems facing companies already ‘on the edge’.

And they pointed out that the requirement for businesses to become current with their Business Licence and real property taxes, and National Insurance Board (NIB) contributions, before they can complete VAT registration, might create a wall some owners are unwilling to climb.

Mr Bowe, though, pointed to the positive side of such an impact. He also distinguished between companies who “knowingly” failed to pay due taxes, and others that had fallen behind on some payments.

The Tax Coalition chair said “all legitimate businesses who have made good faith efforts to be current” with their taxes had nothing to fear from VAT’s implementation, and associated compliance demands, as the Government was willing to agree payment plans with them.

“There’s not great empathy for businesses not paying taxes, and seeing this registration process as being impossible,” Mr Bowe told Tribune Business.

“In reality, these businesses should not have been operating, as they were gaining an unfair advantage over legitimate competitors.

“It’s [VAT and associated compliance] to shut down those corrupt business owners, and to allow the decent business persons to maximise their profits and returns, so we have ethical and strategic businesses operating for the betterment of the economy and country.”

Mr Bowe added that while some companies were “crying about the intrusiveness, and how much is being asked for” in VAT registration, most of this information was required in complying with other taxes.

AT’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 in theory yield greater revenues in several taxation areas.

With the Government now able to assess the monthly ‘goings on’ at VAT registrants via their returns, it will also be able to use its investigative powers in relation to the new tax to cross-check what it is receiving in other due taxes from the majority of Bahamian businesses.

However, several other observers, notably a report produced by the Nassau Institute ‘think tank’, have suggested VAT could stimulate further growth in an already-sizeable Bahamian ‘black economy’ unless the Government’s enforcement efforts are up to the mark.

Mr Bowe, meanwhile, told Tribune Business that the Coalition for Responsible Taxation was set to meet with the Government later this week to agree a “comprehensive list” of all outstanding VAT-related matters, possible solutions, and how these would be communicated to the public.

“There’s still quite a lot in our minds that needs to be agreed, sat down and worked out,” Mr Bowe told Tribune Business.

He pointed to recent confusion over whether VAT would be levied on examination fees, and the Government’s clarification that it would not be levied on commercial property conveyances, as examples of such issues.

“This is where I’m saying that that dialogue and clarity needs to come through,” Mr Bowe said.

He added that the VAT ‘exemption’ for commercial property sales was dealt with in a different part of the legislation from the exemption on residential sales, something that exacerbated the confusion.

The debate over VAT ‘inclusive’ versus ‘exclusive’ pricing remained top of the private sector’s concerns, with the distinction between residents and non-residents also seemingly subject to interpretation - rather than clearly defined in statute law.

“The Coalition is hoping to increase the dialogue and pressure with government to get this list of outstanding matters resolved,” Mr Bowe said, pointing out that it was mid-November and VAT was six weeks away.

“We’re prepared to roll up our sleeves and work as well. We want to have an actual comprehensive list of what issues are outstanding, what is already resolved, what the proposed resolutions are, and how they are going to be communicated to the community.”

Mr Bowe said flexibility on both the Government and private sector sides was key, as no progress would be made if there were “two bull headed parties”.