The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s top finance official has questioned the accuracy of Bahamian economic growth data because of years of “under-reporting” by multiple Bahamian businesses.

Simon Wilson, the Ministry of Finance’s financial secretary, said the implementation of Value-Added Tax (VAT) on New Year’s Day 2015 had, for the first time, enabled the Government to see the true sales activity of many Bahamian companies.

He argued that, in the past, the Department of Statistics and other agencies attempting to measure the Bahamian economy’s growth had failed to capture much of the activity due to companies under-reporting sales to minimise Business License fees.

Disclosing that VAT filings showed some large registrants were “growing at three-four times” the nominal rate of GDP growth, Mr Wilson told the Chamber of Commerce’s State of the Economy 2017 forum that this showed there was “significant” activity not being captured by official statistics.

As a result, he suggested that the revised data, showing the Bahamian economy contracted by 0.52 per cent and 1.66 per cent, in 2014 and 2015, respectively, may not be accurate - and a major under-estimate of what actually occurred.

“We’re the only country in the Caribbean with three years of negative growth,” Mr Wilson said, referring to official data.

Pointing out the challenges with collecting statistics in an island archipelago, the Financial Secretary added that prior to VAT’s implementation, there was much that businesses were able to conceal from the tax authorities.

In particular, he argued that many Bahamas-based companies were able to under-report their sales revenue and turnover in a bid to minimise Business License fees, a ‘loophole’ since closed by the requirement for auditor sign-off.

“We have seen a significant amount of businesses that were under-reporting their revenue, suppressing their revenue and suppressing the country’s GDP,” Mr Wilson said.

“Some large businesses are growing at three-four times’ the rate of nominal [GDP] growth. They’re growing, in some cases, by double digits, so we know there’s significant growth in the economy not captured on the consumption side.... There’s significant economic activity that’s not being fully reflected.”

VAT’s implementation, with its self-enforcing mechanism and requirements for registrants to produce the full transaction chain ‘paper trail’, has enabled the Government to better assess the amount of economic activity taking place in the Bahamas.

It is now able to use the monthly and quarterly VAT filings to determine a businesses’ true annual sales, and use these to cross-check with Business License fee payments and filings, eliminating discrepancies there.

Mr Wilson said the Department of Inland Revenue was now able to identify companies that were “paying their Business License on $5, but paying VAT on $10”.

He added: “We’re able to be more aggressive on identifying anomalies in the tax system. That’s yielding significant amounts of revenue.”