The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Large insurance industry players were caught up in “confusion” over whether it was necessary for them to complete Value-Added Tax (VAT) returns for January despite their ‘exempt’ status, Tribune Business was told yesterday.

Gowon Bowe, the Coalition for Responsible Taxation’s chairman, confirmed that there had been at least a temporary disconnect between the sector and the VAT Department over whether it was necessary to submit January returns.

The Bahamian insurance industry is currently totally ‘exempt’ from applying the 7.5 per cent levy to its customers’ premiums until July 1, when property and casualty and health carriers will have to charge VAT.

As a result, with no VAT ‘outputs’ to be collected and passed to government, and no ‘input’ credits to be claimed yet, many in the insurance industry did not see the need for entities with an annual turnover exceeding $5 million to file for January.

The Government, though, is understood to have been anticipating that large insurance companies would have filed by the March 2 deadline, as it wants to keep track of the level of inputs it will have to ultimately refund under the formula agreed with the sector.

“I do know there was some confusion as it was relating to insurance companies,” Mr Bowe told Tribune Business. “The Government was looking for filings from them, and the insurance companies believed they should not be filing until July.”

To deal with industry concerns about not being able to reclaim or ‘net off’ the VAT incurred on their inputs during the 2015 first half, Mr Bowe said insurers had agreed to a formula whereby they could reclaim credits for these costs.

This process, though, will only begin after July 1, and the amount of credits that insurers can reclaim has been capped relative to insurance premiums received and the 3 per cent premium tax already paid on these.

Patrick Ward, Bahamas First’s president and chief executive, confirmed Mr Bowe’s account, telling Tribune Business: “We were getting some mixed signals, but I can’t be more specific than that.”

Another high-level insurance source, speaking on condition of anonymity, confirmed the VAT filing confusion, saying: “It came as quite a surprise that they [the Government] expected that.

“There was nothing to do with premiums or charging of VAT.”

Timothy Ingraham, Summit Insurance’s president, added: “As far as we were concerned, there was a notice at some point that indicated we should file. We clarified it with them [the Government], and did our filing.”

John Rolle, the acting VAT Comptroller, could not be reached yesterday for comment on that issue.

Yet in a statement, the Ministry of Finance said 95 per cent of the 550 VAT registrants who were expected to file for January - large businesses with over $5 million in annual turnover - had completed the returns process.

“We have worked with Bahamian businesses to ensure that they understand their VAT filing responsibilities, and are happy to report that the vast majority of large businesses had a successful experience,” Mr Rolle was quoted as saying.

The VAT Unit urged businesses to allow two days for their electronic tax payments to reach the Government, and to declare ‘border VAT’ that is payable to Customs, but has been deferred, on their returns.

Total sales and VAT must be reported, while tax refunds will only be paid if bank details are verified.

“The results overall for the February filing process were incredibly positive, and we are confident that future filing processes will continue to get smoother,” said minister of state for finance, Michael Halkitis.

“Tax reform is a key component of our Government’s plan to reduce the deficit, thereby reducing our need for additional borrowing.”

The first VAT quarterly filing deadline is set for the end of April, and will require more than 5,000 businesses to complete their first return.