By NEIL HARTNELL
Tribune Business Editor
The Government sanctioned around 33,000 real property tax delinquents in both 2015 and 2016, an OECD report revealing the scale of its struggles to collect all due revenue.
The Organisation for Economic Co-Operation and Development's (OECD) "peer review" of The Bahamas' ability to meet beneficial ownership and tax information standards, obtained by Tribune Business, also discloses that penalties for Value-Added Tax (VAT) non-compliance more than tripled in number in 2016 compared to the tax's first year.
They increased from 507 in 2015 to 1,558 the following year, with the OECD report revealing that most of the penalties levied by the Department of Inland Revenue (DIR) related to late VAT return filings or payments.
It also disclosed that VAT "adjustments", meaning changes to the amount of tax paid by the 6,000-plus registrants, rose nearly six-fold in number- jumping from 117 to 672 year-over-year as the Government's inspection and enforcement initiatives moved into high gear.
No dollar figures were provided on the penalties collected by the Government, nor was any culprit named, but the real property tax data provided shows this continues to be the revenue stream most plagued by compliance deficiencies.
The OECD report noted that penalties were imposed on 33,295 real property taxpayers in 2015, with that number staying fairly constant at 32,940 the following year. The "penalties" likely refer to the surcharge that is typically added to a taxpayer's bill the following year when they fail to make due payment, and are unlikely to represent an indication of collection success.
On-site inspections of companies to confirm Business Licence and VAT compliance also increased four-fold over the two-year period assessed, rising from 1,500 in 2015 to 6,248 in 2016.
The OECD report was especially appreciative of the Government's decision to introduce VAT from January 1, 2015, given that it would improved business record-keeping - the access to accounting information being one of the benchmarks by which The Bahamas and other countries are assessed.
"Almost all penalties imposed by the Department of Inland Revenue were related to late filing or payment of taxes, although a check of the accounting records has led to VAT adjustments also," the OECD "peer review" said.
"The Department of Inland Revenue indicated that more detailed audits of the accounting records commenced in September 2016. This should lead to more accurate accounting records being kept by those Bahamian businesses subject to the above [Business] Licence and taxes going forward."
But, elsewhere, the OECD "peer review" expressed concern that the Registrar General's Department was "inconsistent" in ensuring companies maintain current information on their ultimate legal owners because it is more focused on collecting fees.
Noting that the Department has more than 80 staff, the report found there was "no automated system of monitoring and application of penalties" for Companies Act companies that failed to file the necessary ownership details and meet other legal obligations.
Some 158 Companies Act entities, and 5,901 International Business Companies (IBCs), were struck off during the 2013-2017 review period. The OECD report said the latter related mostly to non-payment of fees, while the Companies Act strike-offs were linked to "the failure to file required documents", such as changes to registered details and annual statements.
"The Registrar General's Department has not performed systematic monitoring of compliance with filing obligations (such as the obligation for companies incorporated under the Companies Act to file an annual return, including a list of the current members of the company)," the OECD report said.
It added that this was blamed on the Department's restructuring, and adoption of electronic registration and record-keeping, but the report continued: "No monitoring of record-keeping obligations, such as the obligation for all companies to keep a register of members, was conducted.
"As a result, no direct penalties have been imposed during the peer review period for failing to keep a register of members, or for not filing an annual statement. The only time the Registrar General's Department would actively check whether filing requirements are met is when a company requests a Certificate of Good Standing, which will not be issued without up-to-date documentation having been filed with the Registrar General's Department."
While the Business Licence Department provided a further 'check' on beneficial ownership information's provision, the OECD report noted that just 4,145 companies were licensed in 2016 as compared to the more than 70,000 companies registered with the Registrar General's Department. And that figure corresponds to only 10 per cent of firms incorporated under the Companies Act.
The OECD report said the Bahamas explained this by pointing out that the other Companies Act companies were likely used for activities that do not need a Business Licence, such as estate planning and family holding companies.
Still, the report said: "Monitoring by the authorities of the requirements to keep legal ownership information for companies does not consistently take place. The Registrar General's Department is the primary responsible authority for monitoring compliance with these requirements, and its focus has been on the payment of registration fees by IBCs.
"Some monitoring is also taking place with respect to companies incorporated under the Companies Act because they must file annual returns with an up-to-date list of members, but the Registrar General's Department has not been able to produce any compliance and enforcement statistics in this regard."