The Government last night unveiled its promised crackdown on tax defaulters, promising to first pursue the largest, wealthiest delinquents - some 6,000 businesses and 5,000 high-end property owners.
The Ministry of Finance, in a statement, delivered an unwelcome early Christmas present for some, as it pledged to go after the 600 businesses “with the largest apparent discrepancies” between their Business License payments and Value-Added Tax (VAT) filings.
Noting that these represented 5 per cent of all licensed Bahamas-based businesses, the Ministry of Finance said it will also “courier” demands for extra real property tax payments to 5,000 homeowners in wealthy and upper middle class communities.
The courier notices, which will be sent to both the businesses and property owners, are due to be issued from today, as the Government targets those it believes are “not paying their fair share of taxes”.
The Ministry of Finance statement added that the compliance/enforcement drive is designed to “level the playing field” for tax compliant businesses, thereby upholding the fairness and equity of the tax system while eliminating any competitive advantage gained by tax delinquents.
Simon Wilson, the Ministry’s financial secretary, said in a statement: “Today we are demonstrating our commitment to take compliance with tax and Customs laws seriously.
“We believe this initiative is key to shift the paradigm toward a country where businesses and residents take their tax obligations seriously, and understand that we are committed to compliance and – where necessary - enforcement.”
He added: “Our new revenue management approach affords us the opportunity to analyse and conduct taxation assessments based on data provided by businesses and residents. This process will assist us in identifying businesses and individuals who have not paid their fair share of taxes, and create an opportunity to collect those outstanding taxes.
“We will work with stakeholders throughout to ensure that we are operating in a transparent manner as we undertake this urgent work, and have already begun these consultations.”
The initiative, at least in concept, is likely to be applauded by groups such as the Organisation for Responsible Governance (ORG) and Bahamas Chamber of Commerce and Employers Confederation (BCCEC), who have long called on the Government to undertake greater efforts to collect all revenues due to it.
Indeed, all tax compliant businesses and taxpayers are likely to support such an effort in principle, given that it promises to relieve the increasing burden placed on those who pay their taxes and fees in full, and on time.
The Auditor General has consistently revealed over the past several years the failures of various government agencies and departments to collect the Government’s revenues, and many will now wait to see whether the execution is as good as the idea.
Many observers are likely to be sceptical as to whether those taxpayers with the right family and political connections will escape the enforcement net.
And the Christie administration is taking something of a political risk with the timing of this initiative, given that Christmas is looming and, more importantly, a general election is on the horizon within six months.
Some are likely to interpret the timing as an indication of just how deep the Government’s own fiscal and financial problems are, and its desperation to collect every available cent of revenue due to it.
Tribune Business has heard constant speculation in recent weeks of deep-rooted cash flow problems being experienced by the Government and Public Treasury, although no proof has been provided.
The Government’s difficulties are likely to have increased as a result of the $600 million repair bill, some $200 million of which was not covered by insurance, and the revenue and economic losses, stemming from Hurricane Matthew.
It has already undertaken $150 million in extra borrowing, and the Ministry of Finance alluded last night to the problems caused by the Category Four storm.
“The prospects to reduce leakage of government revenue through the work of the Revenue Enhancement project comes at a time when the country is challenged to rebuild national infrastructure and provide much-needed assistance to the many residents whose homes and businesses were destroyed or extensively damaged by the impact of Hurricane Matthew,” it added.
The project will initially focus on VAT, real property tax, Business License fees and Customs-related taxes and fees.
The Ministry of Finance said: “Analysis reveals that many businesses have a discrepancy between their VAT revenue filing, their Business License filing and, in some cases, their Customs Duty filings.
“As early as November 21, 2016, roughly 600 businesses with the largest apparent discrepancies in their reporting will be couriered notices explaining the discrepancy, and asked for payment or clarification of the amount. These taxpayers represent roughly 5 per cent of the licensed businesses in the country.”
As for real property tax, the Ministry added: “Analysis of real property tax assessments reveals that a substantial number of property owners in the Bahamas are under-paying their true tax liability, either because the valuations are out of date, the properties are misclassified, or they are unregistered entirely.
“In the very near future, the Ministry will courier communications to 5,000 property owners, requesting payment of their additional property tax assessments together with their regular tax bill. These properties are in higher value or upper middle class communities. The value of these properties will be re-assessed, if they were not assessed, during the last five years.”
“In the coming weeks, another round of notifications will be issued to owners of properties that are either not registered for property tax, or misclassified. An example of a misclassification is a business property (a store) that is classified as residential.”
The Ministry pledged that the Inland Revenue Department would work with targeted taxpayers whose homes had been impacted by Hurricane Matthew.
The Ministry added that new Customs procedures were being created, and new container examination procedures implemented.
“Those that reveal material discrepancies between actual content and what is declared will result in the importer of the goods paying the proper Customs duty, as well as a fine for under-reporting, where the misreporting was substantial,” it said.
“Finally, another work stream will involve the completion of VAT and Customs post-clearance audits. This activity involves conducting audits of businesses that analysis suggest may be inaccurately reporting on their VAT, Business License and/or Customs Duty filings.”
The Ministry is thus making good on promises last week by Michael Halkitis, minister of state for finance, who said the Government expected to generate an additional $40 million-$80 million in revenue from the initiative.
Mr Wilson said: “All taxpayers selected for further verification or audit have been identified objectively through risk-based data analysis - not subjectively or at random.
“We remain firmly committed to ensure fairness, compliance and revenue growth. The project team, which comprises a seasoned group of employees of the Government of the Bahamas, supported by external technical expertise, is working tirelessly to ensure that we can effectively implement this vital aspect of our revenue management plan.”
Comments
John 7 years, 5 months ago
Consumers should therefore brace themselves for price increases as affected businesses raise their prices to account for increases in property taxes, business licence fees and those who were not paying the right amounts of customs duties. The businesses that were compliant will benefit because their prices will not have to be increased. But there should be concern for governments increasing appetite for funds and yet its failure to pay down the national debt.
The_Oracle 7 years, 5 months ago
"not paying their fair share of taxes" Fair according to whom? By what Rule of Law? by the hand of some mediocre Civil Servant, or a vindictive malfeasant politician? "The Ministry added that new Customs procedures were being created, and new container examination procedures implemented". I put it to them that the existing examinations and procedures if followed were more than adequate, but were poorly followed if at all. More rules does not make compliance better.
Well_mudda_take_sic 7 years, 5 months ago
And to think that Anthony "Kiki" Kikivarakis of Kikivarakis & Co., a former senior partner at the Deloitte accounting firm, received a very lucrative government contract for targeting those businesses and individuals who will be persecuted by the corrupt Christie-led PLP government which is now starved for cash as a result of having squandered the people's resources for many years, including our more recent VAT dollars, through rampant graft, waste, fraud and outright theft. Kiki was overheard saying that all he had to do to target the businesses and individuals to be preyed on by Crooked Christie's government was go through the yellow pages of the phone book and use BahamasLocal.com to identify all medical doctors, lawyers, accountants, etc. Apparently none of Kiki's former partners at Deloitte, including the very big money ones like Sir Snake himself and others like him, have been targeted. He then apparently used existing real property tax records and certain realtor databases to identify the "wealthier neighbourhoods" to be targeted for additional real property tax assessments. What a royal joke!
Sickened 7 years, 5 months ago
And why should we pay any more taxes if the money is just going to disappear. If the government stopped thiefen so much we would have no debt!!!
$800 million extra VAT dollars - GONE!!!!
Send me a bill and I will send it back with CACA on it!!
Well_mudda_take_sic 7 years, 5 months ago
Gotta hand it to Gordon "Butch" Stewart, the owner of Sandals Royal Bahamian. He told Crooked Christie and Shameless Shame to bugger off or else! He's done what cowardly Bahamian owners of small and medium sized businesses have failed to do: Stand up to Crooked Christie and his despicable bunch of corrupt greedy bandits!! Bahamians need to understand that being docile is to invite certain demise when it comes to dealing with the corrupt Christie-led PLP government and Crooked Christie's business cronies like Sir Snake. And Minnis would be no different than Crooked Christie if Bahamian voters are so foolish as to waste their mighty vote on the FNM in the next general election.
GrassRoot 7 years, 5 months ago
yes, it is class warfare in the Bahamas. the Have's will kick the government's ass (whatever side it is), the have nots have to suck it up, as they cant afford the lawyers. So that leaves the Middleclass..... hello!!! middleclass? anybody home?.... long gone.
John 7 years, 5 months ago
So is then a shameless witch hunt to track down and overtax non PLP supporters? Then watch business close down like falling dominoes because many businesses are already not making a profit, some for years. They (government) will essentially be digging a ditch for themselves because much of the revenue they realize now will dry up.
alfalfa 7 years, 5 months ago
And after they courier their letters of demand to these "delinquent" business and property owners, their cronies and "boys" will still owe the bulk of the unpaid taxes and fees, and not a damn thing will be done to those, while others will face prosecution. What a joke; but this will not be funny come next May.
PapaGolf 7 years, 5 months ago
You know what's coming next, right? Income taxes.
GrassRoot 7 years, 5 months ago
besides the usual bipartisan bickering, the Government is doing the right thing. Its looking and going for the money where there is money. Why should the government go after cash strapped property owners that never paid RPT (with or without invoice), all you create is homeless people and a bunch of undesirable real estate on the bankruptcy pile. So much for that. What this Government did wrong was to announce the initiative. It finally does what it should have done a long time ago. So nothing new here. However, the way it is presented It sounds like class warfare and that is what they will get. The good thing with people that have money is they could pay the RPT, the bad news is they also have money to hire all the lawyers they need. Just take a look at the reliability of the Bahamian postal services and 50% of the claims will be contested on the basis of never having been properly served. So good luck with all that. Other than that, I agree with most of the above said. Please Dear Government, stop the bleeding. Stop throwing money of the bridges and shredding it. No rocket science. S P E N D L E S S M O N E Y.
B_I_D___ 7 years, 5 months ago
Agreed that a crackdown and enforcement needs to happen...but how many on that master list will be 'excluded' because of political connections?
John 7 years, 5 months ago
The fact is that we have a tripartite economic society; There is the foreign investor, who is legally being excluded from paying the same taxes that local Bahamians, and local business pay. Then there is the governing party and its croonies and faithful followers, who are being politically excluded from paying taxes and/or are getting so many kickbacks or government contracts or have so many 'other' unfettered sources of revenue because they are in favor with the government, they can pay the remainder of what taxes they are required to pay without an issue. Then there is the local, ordinary hard working Bahamian, who because the other two sectors and not paying their fair share of taxes and/or because the government is inefficient, unaccountable, showing favors to the selected, must pay more than their fair share of taxes. And because, by nature, they are, for the most part, law abiding citizens and not generally a rebellious set,they pay their taxes when even a small amount or pressure is put on them. Even though the tax burden is more than they can afford to bear.
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