The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BAHAMIAN engineers yesterday warned that the Government might lose due Value-Added Tax (VAT) revenues due to a ‘loophole’ on contracts where most of the fees went to their foreign counterparts.

Bahamas Society of Engineers (BSE) members said locals were too often getting “crumbs” from contracts where foreign architects and engineers used them as the ‘engineers of record’.

Their foreign counterparts earned the bulk of the contract fees, and the engineers expressed concern that while the payments to Bahamians would attract VAT, the 7.5 per cent levy would miss that to the overseas architect/engineer.

BSE members, speaking at a luncheon yesterday, expressed concern that while they were being bypassed in favour of foreign firms, they were nonetheless being used as ‘engineers of record’ to fulfill Bahamian regulatory requirements.

Some added that while their fees for such work, which were essentially “crumbs” compared to the true value of architectural drawings, were VATable,  the tax was unlikely to be paid on the true value of services rendered.

DeCosta Bethel, the BSE president, said: “I  may be charging $1,000 as an engineer of record while the architect abroad is charging $150,000 for the drawing, but that’s missing.

“A guy may want to build a house and he goes to, say New York, and gets the architectural services; the civil services out of California; and the structural services out of Florida.”

Teran Nichols, a senior civil engineer, said: “What we get is the crumbs because what happens is they can’t submit these drawings to the Ministry of Works without a local person.

“We, however, are not the main engineer. The main engineer is overseas, and the client is only going to want to pay us pennies. Granted, today we will have to charge VAT on that. The main fees, however, are paid abroad.”

  Mr Nichols added: “The reality is that it is wealthy Bahamians and foreigners who are going out and buying these services abroad. A lot of this is happening. We are now only engineer and architects of record.

“I don’t know that there is any law about a private person going abroad for services. My difficulty is they are not paying the VAT on the value of the services they are getting abroad. My concern is about how you can police that. That is a loophole.  How do you know what the guy in Florida or wherever charged him for his services.How do we know?

“The foreigner is using his foreign account to pay his foreign consultants for services he wants done here. No one knows what transaction really transpired between the client and the foreign architect.”

    VAT Unit officers, Alfred Spence and Benjamin Miller, who led yesterday’s presentation, stressed the need for Bahamian engineers to report such activities to it so appropriate action could be taken.

Mr Nichols noted, however, that such disclosures would have to be strictly confidential as ‘whistleblowers’ could effectively find themselves shut out from future business opportunities for reporting clients.