The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The private sector has this week written to Prime Minister Perry Christie and several Cabinet ministers to urge that they again review the Business Licence fee structure, on the grounds that “we ought to be in the business of making business easier”.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that “loud cries of complaint” were being heard from across the private sector about the “onerous” costs and process associated with Business Licence compliance.

Warning that the fees and associated regulations were exacerbating the tight financial position of many businesses, the Chamber fears the Business Licence could “contribute to the shuttering of many businesses”.

It is calling for the Government to act on three key issues in its Business Licence position paper, which Mr Sumner said yesterday was similar to the contents of letters sent to Mr Christie and his ministers earlier this week.

The Chamber is urging that:

• The Government live up to the commitments given in pre-Value Added Tax (VAT) discussions, and its associated ‘White Paper’, to review the Business Licence fee once it knew how much revenue its ‘new’ 7.5 per cent levy would generate.

• That it also increase the annual turnover threshold, above which companies must hire an accountant to certify their figures, from $100,000 to at least $400,000, and preferably $1 million.

• And the penalties for missing the end-January returns filing deadline be waived, with this date pushed back to March 31. That is the same deadline for the submission of Business Licence fee payments.

“The cry is loud from the business community,” Mr Sumner told Tribune Business. “Both the small and medium-sized, as well as the large ones, are having the same complaints about the cost of Business Licences across the board.”

He added that the main concerns related to the costs incurred by small and medium-sized businesses in hiring an accountant to certify their annual turnover figures.

Tribune Business revealed last week how, for a company with turnover of $100,000, the certification cost would at least match - and potentially even double - what they pay to the Government in Business Licence fees, especially if they do not have an organised accounting system.

“It’s proving to be an onerous task and expense for small companies, earning $100,000 or more annually, to get their accounts certified for the annual returns,” Mr Sumner said.

“It’s the expense, as well as the other requirements and having to meet the deadline for the end of January, is proving to be challenging for those companies. This is an area where, if the deadline is missed, they will face fines and penalties as a result.”

The Government is allowing the private sector just one month to get their accounting records in order post-year end, a timeline that many believe is too onerous.

Tribune Business reported last week how even companies with proper systems usually need two weeks to get their full year accounts in order, giving accountants just a fortnight in which to perform the necessary checks and certification prior to the January 31 deadline.

The Chamber, in its position paper, warned that it was “impractical to have financial records for the previous year completed and subject to an independent attestation exercise” within one month, which was “adding to the level of frustration” felt by the private sector.

Mr Sumner yesterday expressed particular concern for small and medium-sized Bahamian companies, which comprise nearly 80 per cent of companies on the Business Licence Register.

He emphasised that while the Chamber had “no problem with compliance”, and was encouraging businesses to keep their Business Licences current, its concerns related to the ‘ease of doing business’ in the Bahamas - for both local and foreign-owned companies.

“We must not put in place rules, regulations and structures that make it hard for businesses to turn a profit and keep people employed,” Mr Sumner told Tribune Business.

“We ought to be in the business of making business easier, not making it more difficult. Some of these measures that we’ve seen make it more difficult, and we don’t need that at this point in time with the economy in such a critical situation.”

Mr Sumner estimated that at least 15-20 small and medium-sized businesses had closed within the last 12-18 months due to difficult economic conditions.

“Those not closing are threatening to reduce staffing levels to maintain operating margins and capital for their company,” he added.

“We’re not saying businesses shouldn’t pay fees. But we should not make it so onerous on them to turn a profit that their only option is to close or reduce staff levels.”

The Chamber has also not forgotten the commitments made to review the Business Licence fee and associated structure, both during the VAT consultation and in the Government’s ‘White Paper’ on tax reform.

In its position paper, the Chamber said suggestions were made to the Government during the VAT discussions that it consider returning Business Licence to their pre-July 2013 levels after the new tax was implemented.

It added that of the four tax reform objectives that the Government’s ‘White Paper’ said would occur simultaneously with VAT, the only one yet to be acted upon or set in motion is to “eliminate Business Licence Tax as currently structured”.

The ‘White Paper’ had proposed reducing Business Licence fees to a flat $100 charge for every business, regardless of turnover, with Government officials subsequently pledging to assess the situation once VAT revenues could be accurately predicted.

Mr Sumner yesterday said the Government was “meeting and exceeding those projections”, with VAT collections “outperforming” expectations, in a hint that it was now time for the Christie administration to act on its Business Licence fee pledges.

The Chamber’s paper said: “The BCCEC therefore appeals to the Government of the Bahamas to move quickly to evaluate the existing Business Licence fee structure in light of VAT implementation, and the proposals included in the White Paper.

“The BCCEC is willing to assist in such an evaluation and make recommendations that lead to a Business Licence fee structure that balances the overall costs to businesses with the Government of the Bahamas’ overall tax and fiscal reform programmes.”

The Business Licence fee has long been a controversial tax for the private sector, as it is based on top-line turnover, not profits. It benefits low turnover, high profit margin companies, while penalising high turnover, low margin businesses such as food stores and gas stations.

Rick Lowe, Nassau Motor Company’s (NMC) operations manager/director, recently told Tribune Business that the company’s Business Licence fee would again likely exceed its net profit.

Meanwhile, Opposition MP Loretta Butler-Turner yesterday told the House of Assembly that some businesses were complaining about having to include VAT in their calculations of ‘turnover’.

This, she said, meant they were having to pay ‘tax upon a tax’.