By NEIL HARTNELL
Tribune Business Editor
The Government netted almost $96 million in the first six months of its crackdown on corporate and high net worth tax cheats, it has been revealed.
Moody’s, in the ‘credit opinion’ that accompanied Friday’s decision not to downgrade the Bahamas’ rating to ‘junk’ status, said the initiative launched in November 2016 under the former Christie administration had generated additional tax revenues equivalent to 1.1 per cent of GDP (gross domestic product).
“On the revenue side, the Government will maintain various revenue-enhancement measures that were introduced by the previous administration in the 2016-2017 first half,” Moody’s confirmed.
“The tax and Customs enforcement unit, which focused on property tax compliance and customs (air and sea freight) fees, is expected to contribute to a significant uplift in revenues. Through the first six months of this process, additional revenues collected by this unit were $95.5 million (1.1 per cent of GDP).”
The Deputy Prime Minister hailed the crackdown’s success, and pledged that the Minnis administration would further intensify its efforts to go after businesses and high-end property owners deemed not to be paying their fair share in taxes.
Describing the initiative as “very successful”, K P Turnquest told Tribune Business: “We will look to further enhance and strengthen it to make sure we collect the taxes due to government, without adding new taxes or placing any undue burden on taxpayers.”
The crackdown’s success will likely raise questions as to why the Government is moving Simon Wilson from his post as the Ministry of Finance’s financial secretary, given that he was largely seen as the architect and driver of the effort to target tax cheats.
Tribune Business sources have suggested that Mr Wilson is being moved to the Central Bank of the Bahamas as an economic adviser, a decision that is being questioned by some in the business and financial community who respected his ability to take decisions.
This newspaper had heard suggestions back in April, during the election campaign, that the Free National Movement (FNM) planned to remove Mr Wilson from his post if elected, and replace him with former Bahamas Telecommunications Company (BTC) marketing executive, Marlon Johnson.
Such talk never completely went away, and this newspaper’s contacts confirmed late last week that the Government had made its move with regard to Mr Wilson, who has served both PLP and FNM administrations in senior posts including the Ministry of Finance’s director of economic planning, deputy financial secretary and financial secretary.
The $96 million referred to by Moody’s is for the six months to end-April 2017, meaning it is extra revenue collected under the former Christie administration. That sum is likely to have increased further under the Minnis administration.
Michael Maura, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, yesterday described the tax cheat crackdown as “absolutely necessary”, and urged the Government to complete the Customs Electronic Single Window (ESW) project by March 2018.
“With regard to tax enforcement, yes, this is absolutely necessary and must continue,” he told Tribune Business. “The border, as an example, continues to be plagued by fraud and illegal activity. Here is an area that requires investment if it is to return greater tax income.
“The Government must ensure that the ESW Electronic Single Window project is completed within six months. This ESW system will significantly improve the risk analysis and fraud detection capability of Bahamas Customs. This project was to be completed by October 2017, but has been delayed to March 2018.
“The ESW system will not only serve to address fraudulent under-valued import declarations, but also serve to identify potential smugglers of contraband to include illegal drugs and weapons,” added Mr Maura, speaking also in his capacity as Nassau Container Port chief executive.
“The border is also in need of modern container and cargo scanning technology, and a container examinations facility. This will directly assist Customs and law enforcement in screening import and exports while the cargo and containers are still in the port. This will result in greater efficiency to the legitimate trading community,` as they will experience less physical intrusion and delay in their supply chain process.”
Mr Maura also expressed concern that the Bahamas’ Value-Added Tax (VAT) was “not in line with international best practices”, with the tax’s ‘rules’ not finalised and its application at the border “convoluted”.
“With respect to tax administration, I am concerned that the VAT rules have not been finalised and, in some instances, are not in line with international best practices,” he said.
“My worry is that our current fiscal state has resulted in a current VAT application which is not in line with best practices. Too many VAT registrants complain of VAT refunds that are over a year old. And, specific to the port, the application of VAT is convoluted and not in line with best practices.”
The tax crackdown was unveiled in the wake of Hurricane Matthew, which increased the Government’s desperation for every cent of revenue due to it as a result of the fiscal and economic losses created by the Category Three/Four storm.
It has focused on Value-Added Tax, Business License fees, Customs/import duties and real property taxes. The Government has been able to compare the regular VAT filings with Business License fee submissions to detect companies who are under-reporting or evading the full sum due with the latter.
In unveiling its crackdown, the Ministry of Finance said it was targeting 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 also issued demands for extra real property tax payments to 5,000 homeowners in wealthy and upper middle class communities thought to not be “paying their fair share of taxes”.
The Ministry of Finance said then that the compliance/enforcement drive was 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.