The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to “clarify” its Value-Added Tax (VAT) collection statistics, a leading private sector executive acknowledging the progress but warning it was too early to “heap praises on ourselves”.

Gowon Bowe, the Coalition for Responsible Taxation’s chairman, told Tribune Business it would be to the Government’s - and the Bahamas - advantage to provide detailed, clear data on the VAT achievements to-date, especially if they were ahead of projections.

This transparency, he said, would boost the nation’s standing with the likes of the International Monetary Fund (IMF) and the international credit rating agencies, which determine the Bahamas’ sovereign creditworthiness.

The Government was yesterday touting its positive early VAT achievements, namely a 95 per cent compliance rate among its January filers - businesses with annual turnovers of $5 million or greater.

And Michael Halkitis, minister of state for finance, said a total $28 million had been collected from the January returns - $11 million by Customs at the border, and $17 million from large businesses via their return filings.

However, it is difficult to determine what these numbers mean without further explanation. For example, is the $17 million collected from January filers the collective ‘net’ sum, after all their input VAT has been ‘netted off’, or is that still the gross.

Mr Bowe suggested the $17 million was likely the ‘net’ sum that would be retained by the Government and, ultimately, the Public Treasury.

But another question relative to the sums quoted by Mr Halkitis is whether the $11 million collected by Customs ‘at the border’ will all be retained by the Government.

These sums will include ‘input’ payments by Bahamian businesses, incurred on their imports, and a large chunk of that $11 million will thus be ‘netted off’, or recovered against companies’ VAT output payments.

Mr Bowe agreed that “a large part of that” would relate to major importers who submitted January filings, noting that monthly registrants - numbering around 550 companies - were set to deliver between 60-80 per cent of the Government’s total VAT revenues.

“We do need clarity in the numbers,” he told Tribune Business, explaining that businesses’ VAT ‘offset’ would likely increase further.

“I’ve heard from some filers who believe they have more input credits to get,” Mr Bowe said. “They went ahead and did their filings, and inputs they did not take advantage of, they will put in their February filings.

“They will not have all their expenses in yet. I imagine there’s still some more to be offset by businesses going forward, but not a tremendous amount, so I expect the $17 million is already netted.”

He added that major importers were unlikely to leave ‘input’ offsets and credits sitting at the border, given the impact this would have on cash flows.

Yet the Coalition chairman also questioned how much of the $11 million in border VAT had been paid by quarterly filers, who had yet to ‘net it off’ or reclaim it.

“Let’s be clear on what we have achieved,” he told Tribune Business. “What’s going to be important is the quality and accuracy of information.

“It’s fine to give these type of statistics, but we must make sure they are accurate and don’t have any hidden nuances that may trip us.”

Still, Mr Bowe said it would be “worthwhile” for the Government to break down, and lay out, the first month VAT statistics “in a very clear and decisive fashion”.

He suggested that it should detail the gross VAT amounts collected by both filing businesses and Customs at the border; the ‘net’ collected from filers when it was ‘offset’ against their input payments and credits; and the final amount that accrues to the Public Treasury.

Doing so, Mr Bowe said, would ensure the Bahamas could deliver a ‘good news’ story to the likes of the IMF and Moody’s, providing quality, accurate information showing it was either on target or ahead of its VAT revenue forecasts.

The Coalition chair pointed out that the $28 million figure cited by Mr Halkitis, if accurate, suggested the Government was “on target” to realise its $350 million full year VAT projection.

And he added that the 95 per cent compliance rate among January filers was ‘a tremendous achievement and should be seen as that”.

“The April 30 filing will be the next big hurdle to clear or benchmark to assess ourselves against,” Mr Bowe told Tribune Business, referring to the anticipated 5,000 quarterly filers who will submit their first returns.

“The smaller businesses will be the ones with a little more challenges in terms of systems and processes. The bigger ones, while maybe not as efficient, have lots of resources in terms of lawyers and accountant to be able to work through it.”

The Coalition chairman, though, warned that it was too early “to pat ourselves on the back” given that just one month of VAT returns were in.

He added that the Bahamas needed to see a full year of the tax’s returns, and how the revenues were spent, to determine whether it was having the desired fiscal effect.