By NEIL HARTNELL
Tribune Business Editor
A “very frustrated” Bahamian insurance industry is still trying to obtain clarity on Value-Added Tax (VAT) credits just weeks before it must submit those claims, one leading executive warning yesterday: “The clock is ticking.”
Tom Duff, Insurance Company of the Bahamas’ (ICB) general manager, told Tribune Business that the sector was “feverishly” trying to confirm whether its interpretation of the VAT transition guidance notes was the same as the Government’s.
Without this confirmation, Mr Duff said it was impossible for Bahamian insurers to submit accurate claims for thousands of dollars in VAT ‘input’ tax credits for the six-month period to end-June 2015.
The insurance industry was given an extra six-month period to prepare for VAT’s implementation, and it is now less than a week before the 7.5 per cent levy is added to consumer premiums on July 1.
For the six months to end-June 2015, the sector has been unable to reclaim the VAT paid on its ‘inputs’ - something that was acknowledged by the Government as a major concern in terms of the increased cost pressures it imposed.
To allay these fears, the Government and insurance industry worked out a formula for the sector to recover a significant portion of these VAT payments via phased, or staged, tax credit payments.
However, Mr Duff yesterday confirmed that the continuing lack of “clarity” surrounding this solution was both inhibiting the industry’s VAT ‘recovery’ and consuming much of its time.
“I don’t think the queries have been resolved in relation to the transition agreement the Government is trying to put in place between January and June,” he told Tribune Business.
“The Government, in its last draft of the regulations, indicated that the industry would be able to get certain tax credits on claims paid between January and June.
“Unfortunately, that clarity hasn’t been achieved yet, and the Bahamas Insurance Association (BIA) and a number of individual companies have been trying feverishly to get this resolved, and get a clear understanding of what we can recover.”
The BIA’s chairman, Emmanuel Komolafe, did not respond to a Tribune Business e-mail seeking comment. Both Patrick Ward, Bahamas First’s president and chief executive, and Timothy Ingraham, Summit’s president, referred this newspaper to the BIA, saying they had not been directly involved in the VAT implementation issue.
Mr Duff, meanwhile, told Tribune Business that time was running out for the Bahamian insurance industry, as the deadline for it to file its six months’ worth of tax credit/deductions claims was fast approaching.
“It’s very complicated,” he added. “We’ve interpreted the regulations a certain way, and are trying to get confirmation that interpretation’s correct.
“Once we can get clarity we can set up our system so that we can record all the relevant information, and make the submissions.”
The Government wants the Bahamian insurance industry to submit two VAT ‘tax credit’ reports, one for the 2015 first quarter and another for the second quarter.
“Until we have a clear understanding of what we can recover on, we can’t submit the reports,” Mr Duff said. “Otherwise we can submit the reports, but they may be inaccurate.
“We’re working really hard with the BIA and at the company level to resolve it. The clock is ticking away on the deadline, set by the Government, for us to submit the reports.”
He added: “We were encouraged when the Government said they were prepared to allow us to take input tax credits, input tax deductions, against these outputs.
“But trying to pin down the Government on the exact interpretation, and clarify what exactly we can recover, is proving to be a very difficult task. It’s very frustrating for the industry right now.”
Mr Duff told Tribune Business that understanding the true position on VAT tax credits for insurance claims was “more of a challenge” for the Bahamian insurance industry than readying their information technology (IT) systems to charge the 7.5 per cent levy on consumer premiums.
“It’s very frustrating just now for everyone, but we’ll work though it and get it done,” the ICB chief said.