The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Businesses are hitting out at “unconscionable” Government enforcement efforts that require them to submit Tax Compliance Certificates (TCC) to obtain payment for goods and services ALREADY supplied.

Rick Lowe, Nassau Motor Company’s (NMC) director/operations manager, told Tribune Business that the enhanced enforcement efforts threatened to further tighten the stranglehold bureaucracy and red tape are imposing on Bahamian businesses.

The controversy stems from the Christie administration’s efforts to implement legal amendments introduced last year.

These require companies to prove they are compliant with all their taxes prior to receiving payments on public sector contracts worth more than $10,000.

Mr Lowe, though, said his firm was now being asked to provide a TCC to obtain a small ‘four-figure sum’ that the National Insurance Board (NIB) had owed since January this year.

He warned that the demands threatened to “cripple” cash flow for other businesses, while imposing a further compliance burden on legitimate tax-paying firms - many of whom will have to obtain TCCs every month.

The NMC executive, implying that the Government’s move was ‘overkill’, added that it would also do nothing to improve the Bahamas’ ‘ease of doing business’ ranking

“They want a Tax Compliance Certificate in order to pay us for money they’ve owed us since January. It’s unconscionable,” Mr Lowe told Tribune Business of NIB.

“They’re not giving me any warning. They’re saying we’re not going to pay the money we legitimately owe you. It’s as bad as the people not paying the taxes.

“Things are slow, and the Government is saying they will not pay you for goods and services given in good faith. How can you fix your face to say you will not pay for goods and services rendered in January?”

He was responding after the National Insurance Board (NIB), via phone calls and faxes, warned all its suppliers within the last few weeks that TCCs must be provided before they receive payment.

A letter sent out by Sonia Gill, its financial controller, confirmed that they must provide NIB with both a TCC and invoice if they are to receive due payment.

The May 11, 2016, letter, which has been obtained by Tribune Business, says the move is supported by statute law in the form of changes made to the Financial Administration and Audit Act last year.

“To this end, the National Insurance Board is now requesting that all vendors submit a copy of their valid Tax Compliance Certificate along with their invoices for payment to satisfy this requirement,” Ms Gill wrote.

“Please note that payments will not be processed until a copy of your valid TCC is submitted.”

The NIB letter adds that a TCC is valid for six months on a contract worth less than $10,000, but just one month for those valued higher than this sum.

As a result, all companies with Government and NIB contracts valued at over $10,000 will now be required to obtain a TCC every month.

The move, as outlined by the NIB letter, has its legal basis in changes made to Part IIB, Section 19I of the Financial Administration and Audit Act last year.

These mandate that a business/entrepreneur must provide a TCC both to win an initial government tender and obtain payment on that contract, provided the value is greater than $10,000.

The taxes they must be in full compliance with are Business Licences and real property taxes, Immigration (work permit) fees, all Customs-related taxes, Value-Added Tax (VAT), NIB contributions and motor vehicle licensing fees.

However, based on the NIB letter, it appears this is being applied to government contracts of all values.

Mr Lowe, though, questioned why the Government was further increasing the compliance burden on an already weighed-down private sector.

He queried why the administration’s various revenue-collecting agencies were seemingly unable to confirm themselves whether a business was fully tax compliant, rather than sending companies scurrying to the Department of Inland Revenue for TCCs.

And Mr Lowe also asked why different government agencies were acting as surrogate tax collectors for each other, rather than each one taking delinquent payers to court.

“Why is it that the Government reserves the exclusive right to take what they want?” he asked. “If you’re not paying your real property tax, it’s up to them to take you to court.

“It’s up to that government agency to come after you and make you pay tax. Have you heard of any business that has closed because they’ve not paid their Business Licence fee and real property tax?

“Has the Government enforced the law in that regard?” Mr Lowe continued. “If not, they need to change the law and make us all equal.

“They shouldn’t have the right to say that because you provide good and services to another government agency, they’re going to take them. They’ll put you out of business. Where’s it going to end.”

The Government’s likely response will be that the private sector should have known this was coming, given that the changes to the Financial Administration and Audit Act were made more than a year ago.

With the Public Treasury desperate for every cent of revenue it can earn, given the Bahamas’ strained fiscal position, the TCC-related changes will be seen by the administration as further tightening the enforcement circle and eliminating compliance gaps and loopholes.

Mr Lowe said NIB’s response, when challenged over the TCC policy, was that it was being demanded of all government agencies by the Ministry of Finance.

He also revealed that one business, which he declined to name, was informed by NIB that any outstanding sums owed to it would first be used to settle tax arrears if they existed.

Tribune Business was unable to obtain comment from NIB before press time.

However, Mr Lowe said businesses would “waste a hell of a lot of time traipsing around” to meet the TCC demand, given that certificates were not necessarily made available when needed.

He added that the Government’s new policy threatened to “cripple people’s cash flows”, and would be especially problematic for companies relying on payment to service bank overdrafts.

“What will this do to other businesses that do thousands of dollars of business with the Government?” Mr Lowe queried. “Suppose it’s $5,000 for a small business.

“What they’re doing is transferring the burden of what they [Government] should be doing to the private sector, and forcing us to do all the running around.

“It’s depressing. It really is. It slows down the pace of doing business again. It further complicates your efforts and takes you away from running your business and doing the things you need to do.”

Mr Lowe added that similar enforcement policies appeared to have spread to Bahamas Customs, which was also demanding that a TCC be presented before a business was refunded for over-payment.

“Now think about that for a moment,” he said. “You’ve got to be compliant with Customs in order to put an entry.

“You’ve got to provide them with a Business Licence, NIB good standing to put an entry in in your name.

“But you overpay them, and they say they can’t pay you back; you need to bring a new Certificate of Compliance. What the hell? The sole intent seems to be to make it more difficult to run your business.”

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that he understood Mr Lowe’s concerns, and the matter would be addressed with the Government.

He acknowledged the need to balance the Government’s desire to collect all due revenue with the ‘ease of doing business’, and not over-burdening legitimate, compliant businesses with both taxes and accompanying paperwork.

Describing the situation as “a quid pro quo” and “two-way street”, where both sides needed to respect the other’s objectives, Mr Sumner urged the private sector to allow the BCCEC time to deliver an improved situation.

“This is one of the policy measures the Government has decided to implement when it comes to revenue enforcement and collection,” he told Tribune Business, acknowledging that the Ministry of Finance had itself informed the Chamber of its intentions.

“Bearing in mind that the Government just announced it was providing exemptions and reductions on duty on certain items in the Budget, there are areas where revenue is lacking and they are not collecting.”

Mr Sumner told the private sector: “Give the Chamber an opportunity to address the situation. We are aware, following through on this, and expect to have discussions within the next week or so with the relevant agencies in government, including NIB.”

He added that the Government had in recent months shown an increased willingness to listen to the Chamber and its recommendations, holding out hope that a solution palatable to both sides could be achieved.

Still, Mr Sumner said the private sector needed to comply with all applicable laws and taxes as its side of the bargain, with the Government in return ensuring that all tax refunds and payments due to businesses were made in a timely manner.

“We will do what we can to ensure the private sector is not disadvantaged by any moves in government policy or changes in bureaucracy, and get what is due to them,” he told Tribune Business.

“We want to ensure compliance by private sector participants, but also ensure the Government is held to account for what is due to the private sector.

“We will continue to address this issue until we get the results we are looking for. I understand Rick’s concerns, and am going to ask the private sector to bear with us while we address this, but at the end of the day I believe we’re going to get results we can all live with.”