By NEIL HARTNELL
Tribune Business Editor
The Government yesterday retracted a private sector “choke point” by moving to eliminate the need for companies to supply “certified bank statements” with business licence filings.
KP Turnquest, deputy prime minister, told Tribune Business that the Business Licence Act amendments tabled in the House of Assembly showed the Government was responsive to dealing “with the unintended consequences of our actions”.
He conceded that the concerns expressed by Bahamian accountants and businesses had merit, given that the extra compliance requirements were contrary to the Minnis administration’s goal of “making the ease of doing business better”.
Mr Turnquest said the demand for all businesses to provide “certified” bank statement copies would have imposed “additional restrictions” on the private sector, and pledged that a further review of business licence processes will take place going into both the mid-year budget and 2019-2020 budget in May.
He also appeared to break with his top Ministry of Finance official, who had justified the Government’s demands for additional information on the basis that too many business licence filings “do not stand up to scrutiny”. The deputy prime minister, though, yesterday said the “overwhelming majority” of submissions and payments were accurate.
However, Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that the Government had addressed only one - and not the main, or all - concerns of the profession by eliminating the “certified bank statements” requirement.
Calling for a more “comprehensive” reform that addressed private sector concerns while protecting the Government’s revenue, he added the minimising costs and red tape for Bahamian business was essential to the economy’s competitiveness.
“There was significant push back from the accountants as well as some of the business community,” Mr Turnquest told Tribune Business of the legislative changes. “Our objective is to make the ease of doing business better, not to impose additional restrictions and choke points.
“As a result of the feedback, we are responding. We will have a further review going into the mid-year Budget and full-year Budget. We are again demonstrating that we listen when it is pointed out to us the unintended consequences of our actions.
“We respond, and hopefully this meets the industry’s concerns as we go forward and determine the best tax structure for The Bahamas and its administration.”
The controversy was sparked by amended Business Licence regulations, which were put into effect almost unnoticed on May 30 amid the general outcry over the Budget’s VAT hike. These require companies with an annual turnover of $10m or more to provide audited financial statements that will confirm their prior year earnings.
And for those businesses earning between zero to $10m, the regulations stipulate that “a financial statement” confirming their turnover must be supplied to the Department of Inland Revenue (DIR). This was also to be accompanied by “a certified bank statement” covering each bank account held in the business’s name and any other accounts “that are used in transactions” on its behalf.
Mr Turnquest, meanwhile, rejected suggestions that the demand for “certified bank statements”, and the package of changes to the Business Licence regulations it was part of, represented the first steps towards implementing a corporate income tax in The Bahamas.
“No, not at all,” he replied, when Tribune Business raised the concern. “It was primarily a capture tool we wanted just so we can so some analysis around that... That was just support so we can cross-reference that with other data and assist in the compliance effort.”
The Deputy Prime Minister also appeared to distance himself from Marlon Johnson, the Ministry of Finance’s financial secretary, who previously said the extra information was necessary to address the concerns officials have with many Business Licence filings.
“The reality is the overwhelming majority of the certified statements we get from accountants and auditors are accurate,” Mr Turnquest added.
Mr Bowe, though, told Tribune Business that a more “comprehensive amendment” than just eliminating the need for bank statements is required if The Bahamas is to strike the correct balance between the cost/ease of business and ensuring the Government collects all revenues due to it.
The BICA chief, who has yet to see the changes tabled in the House, said: “Hopefully what he [Mr Turnquest] tabled is what in part was being proposed. There were a number of concerns related to the audit requirement, the level of attestation as well as the bank statements.
“Removing the bank statements addresses a concern, but not the primary concern, which was the level of attestation. Overall, the expectation was we would work together to come to a more palatable solution on the level of attestation.
“The bank statements was one element. The Deputy Prime Minister may have addressed that, but it is not the final one as it’s not addressing all concerns.”
Mr Bowe, who revealed that BICA is having “ongoing conversations” with both the Prime Minister and Mr Turnquest, as well as the Ministry of Finance, added that Bahamian accountants were concerned that the language in the Business Licence regulations and what is required do not correspond with industry best practice.
He added that the requirement for companies with a $10m-plus turnover to submit “audited financial statements” with their Business Licence filings was “not usual practice”, given that audits were typically performed at the back end - and not the front end - to check what has been submitted is correct.
The BICA chief also queried why the Government needed to see a company’s balance sheet, income and cash flow statements when Business Licence fees are based on just one element - top-line turnover.
Suggesting that the extra demands were imposing more unnecessary costs and bureaucracy on Bahamian businesses, Mr Bowe said: “I said to the Prime Minister that professional accounting standards require us to have a clear basis on which to provide these services.
“I’m hoping there’s time to sit down and have an understanding that will be practicable. It’s not about resisting change and modernisation. It’s about operating business costs, and when we talk about competitiveness, the ease of doing business and the timelines in which they have to be done, there’s a level of practicality.
“When you talk about submitting financial statements for companies that’s a very excessive demand when they’re only submitting on revenue.”
Mr Bowe said the Government’s quick withdrawal of the “certified bank statements” requirement was positive, showing it was willing “to embrace advice and solutions, which opened the door for further collaboration.
“We have to get to a comprehensive amendment that’s palatable for all parties, giving some level of attestation for the Department of Inland Revenue but not burdening businesses with excessive bureaucracy and cost,” he told Tribune Business.
Mr Bowe added that there also needed to be greater consultation between the Government and accounting industry executives to ensure that further Business Licence changes “don’t fall into the same trap, and have the same level of criticism”, as previous amendments.