The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is moving to eliminate the bi-annual filing of Value-Added Tax (VAT) returns by year-end, in a bid to boost its cash flow and obtain more consistent returns.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, said the Christie administration was now enforcing a policy where all 6,000-plus VAT registrants have to file quarterly or monthly.

“It [the Government] never sent out an official note, but it is a policy being enforced where companies file on a monthly or quarterly basis,” Mr Sumner told Tribune Business.

“There are very few who put in for bi-annual filing, but all those are being encouraged by the time we get around to the second filing for bi-annuals to file monthly or quarterly. So there should be very few, if any, doing that.”

Bi-annual VAT filers, companies with annual turnovers between $100,000 and $400,000, are due to submit their first returns and tax payments to the VAT Unit by the end of this month.

They were allowed to submit their returns, and payments, twice yearly when VAT was implemented on January 1 this year. However, Mr Sumner, a VAT Education Task Force co-chair, agreed that there were compelling reasons for such businesses not to wait until the legal deadline was upon them.

“Even with those companies, we were encouraging them not to wait and do bi-annuals,” he said. “The Government is encouraging more frequent filings to properly manage its cash flow, and for businesses to turn over their filings on a more consistent basis.

“Why take all that time if they are bi-annuals? Get rid of it. It’s [the VAT due] a liability in the accounts. It increases your workload by allowing this thing to accumulate as opposed to getting it out of your system and turned over to the Government. It may cause you more work in the long run.

“Because of the Government’s cash flow, they’d like to see revenue turned over to the Treasury on a more consistent basis.”

The VAT Unit has long been concerned that quarterly and bi-annual filers may be tempted to use due VAT for working capital as its builds up in their accounts over several months.

The danger here is that not only may the Government be deprived of due revenue, but the businesses involved will be breaking the law and open to potential prosecution.

Mr Sumner told Tribune Business that the Government’s ultimate objective was likely to get all VAT registrants on to a filing ‘level playing field’ where they submitted returns/payments monthly, regardless of their turnover.

“The Government is also running this initiative to encourage small and medium-sized enterprises to consider going on a monthly filing basis, rather than quarterly,” he added. “We’re going to be pushing that through the SME division at the Chamber as well.

“It’s more prudent, and makes administrative sense, to get the filing done on a monthly basis rather than quarterly. It’s not going to be an unreasonable expectation for the Government, at some stage, to say it wants all filings monthly rather than quarterly to put everyone on the same level playing field.”

Mr Sumner told Tribune Business that mandatory monthly VAT returns for all was “the recommendation we would make” at the Task Force and Chamber, given that it would “simplify and streamline the process” for all sides.

He added that the relatively high VAT compliance rates achieved to-date meant there “wasn’t a lot of room for improvement” for June, which represents the second return period for quarterly filers.

Mr Sumner described the 90-95 per cent compliance rate for monthly VAT filers, and 80-85 per cent for quarterly filers, as “a tremendous accomplishment”.

Quarterly filer improvement for the three months to end-June 2015 was possible, he added, as those companies were now more comfortable with the system, technology and processes after completing one previous return.

The Chamber chief executive also revealed that many voluntary VAT registrants, companies whose annual turnover was below the $100,000 registration threshold, had applied to the Comptroller to be removed from the register.

This was because they were not incurring as much VAT liability as previously thought.

Mr Sumner said Standard & Poor’s (S&P) praise for the Bahamas’ relative success on VAT implementation “says a whole lot”.

The rating agency said last week that the initial estimates for the January-June period showed VAT generated $150 million in net new revenues, a sum equivalent to 1.7 per cent of GDP.

“This puts it on track to collect new net revenues of $300 million during the first full year it is implemented, which we expect to represent more than 3 per cent of GDP - the Government’s initial goal,” S&P said.

“The execution of the VAT reform represents a significant political and economic effort, and demonstrates progress on the Progressive Liberal Party (PLP) government’s fiscal consolidation efforts.”

Mr Sumner added: “The results speak for themselves. The fact the Government is able to raise that kind of money, and S&P and the IMF recognise this is a reality, it speaks volumes for the successful launch of the VAT regime.”

He warned, though, that it was vital for both the Government and private sector to maintain the present enforcement and compliance culture.

“What must happen now is there has to be enforcement and compliance to maintain that level of success,” Mr Sumner told Tribune Business.

“The Government cannot relent or ease up on that level of enforcement or otherwise we will find ourselves in the state we were previously. It has to be that everyone collecting VAT has to turn those taxes over.

“If that is not done it’s going to create an unlevel playing field where businesses with integrity and responsibility pay taxes over, and those not doing so create an uneven playing field and disadvantage those paying their taxes.

“We’re going to demand that the Government follow through with compliance and enforcement mechanisms to ensure all those required to collect their monies turn them over.”

Mr Sumner said true fiscal responsibility, and reform, would only be achieved when both private and public sectors held up their respective ends of the VAT bargain.