By NEIL HARTNELL
Tribune Business Editor
Chamber of Commerce executives are hopeful that the Government has cleared a self-confessed “backlog”of Value-Added Tax (VAT) refunds that was impacting business cash flows.
Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that a recent absence of private sector complaints was creating confidence that the problem had finally been resolved.
Disclosing that the issue was raised during meetings with senior Ministry of Finance officials at end-January 2016, Mr Sumner said the Chamber was “fairly satisfied” the Government had followed through on promises to eliminate the hold-ups.
“In the last meeting we had several weeks ago, we were assured the matter was being given sufficient attention,” Mr Sumner told Tribune Business, “and those companies experiencing challenges and issues in getting VAT recoveries - either through refunds or credits - were to reach out to the VAT Office or the Chamber to get these matters resolved.
“Since then, we have not had any complaints made to the Chamber from people having these challenges.... Those who would have had these concerns have not come back and said these problems are not being addressed by the Inland Revenue Department. We hope these matters are now resolved.”
This is not the first occasion that the failure to make timely VAT refunds to the private sector has become an issue.
Tribune Business reported back in January how some Bahamian retailers were unable to buy their preferred Christmas inventory due to VAT refund delays, due to the negative impact on operating capital and cash flow due to the latter being ‘tied up’ in taxes.
Mr Sumner said the Chamber “highlighted these issues” at its meeting with the Ministry of Finance, which reassured that “some of the matters coming to our attention were being properly addressed”.
“We were able to identify them from the persons and businesses expressing these concerns to us, and the Ministry assured that they were looking at them and getting them resolved,” the Chamber chief told Tribune Business.
“It was acknowledged at that time there was some backlog that was being addressed, and these matters presented to the VAT Department and Inland Revenue Department, attention would be given to getting them resolved.
“We are fairly satisfied that these matters have been addressed.”
Mr Sumner pleaded with the business community to reach out to the Chamber should the ‘VAT refund’ woes or any similar problem persist, as it was the only way it could address the issue with the Government.
“We’ve not been made aware of any new or outstanding issues that need to be resolved since the end of January,” he added.
Any lingering ‘VAT refund’ problems threaten to give the private sector the impression that the Government is ‘all give and no take’ when it comes to tax and revenue reform.
It could also undermine business community “trust in the integrity” of the new tax regime and its associated processes, especially since the Government has been touting the $317.31 million in gross VAT revenues earned during the first six months of its 2015-2016 fiscal year.
John Rolle, the former financial secretary, acknowledged to Tribune Business last year that it was vital the 6,000-plus VAT registrants enjoy a positive experience when filing for, and claiming, their VAT ‘refunds’.
Despite a “fairly smooth roll-out” from the Government’s perspective, the then-VAT Comptroller agreed that Bahamian businesses needed to a trouble-free ‘full cycle’ if they were to fully trust the new regime.
And Mr Rolle said that the Government meeting its pledge to provide VAT refunds within one month of a claim being submitted was even more important to the private sector than a smooth filing and payment process.
“For us, it’s going to be very important that the refund mechanism lives up to what has been promised, and businesses continue to file and interact in terms of accounts and filing, and the convenience the system is supposed to offer is there,” Mr Rolle said then.
Timely refunds, which are paid when a company’s ‘input’ VAT payments exceed its ‘output’ tax payments, are vital to business cash flows.
Consistent refunds will likely only be incurred by Bahamas-based exporters, whose products are zero-rated for VAT purposes. If other registrants end up in this position, it may suggest that the company is incurring persistent losses and could soon go out of business.
However, the seasonal nature of tourism and retailing, for example, means that the likes of hotels and merchants rely on peak times - Christmas, Easter and ‘Back to School’ - to generate the bulk of their profits, which carry them through the rest of the year.
Such businesses may apply for periodic VAT refunds, and providing them on a timely basis is key to a cash-strapped government fostering private sector confidence that it can hold up its side of fiscal reform.
Barbados, a Caribbean country in an even worse fiscal position than the Bahamas, is an example of what happens when the VAT refund process goes awry, with businesses having to wait months - and sometimes years - for due compensation.