The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance's top official was yesterday "fairly confident" that the new business licence regulations can be adjusted to achieve the Government's goals without being "onerous" for business.

Marlon Johnson, speaking to Tribune Business after a grilling from Bahamas Institute of Chartered Accountant (BICA) members over the demand for bank account details to accompany filings by companies generating less than $10m in annual turnover, said "poor bookkeeping habits" had prompted the Government to take this measure.

Responding to growing private sector concerns that the regulations, enacted on May 30, amount to "overkill" and unnecessary "red tape" given that business licence fees are calculated solely on top-line turnover, Mr Johnson said the imminent publication of guidance notes will help to ease these fears.

"What we have done, and will do very shortly, is to publish the clarifying notes that will outline what exactly is required," the Financial Secretary told this newspaper. "We're confident after meeting with BICA last week that we'll be able to come with some guidelines that will meet our requirements and not be very onerous on businesses that will have to comply with the regulations."

Mr Johnson said concerns over the Business Licence regulations, which were enacted largely unnoticed by the private sector during the 2018-2019 Budget, were only brought to the Government's attention "recently".

He suggested, though, that sufficient time remained to achieve the "balance" required to ensure the Government collects all due revenues without over-burdening the Bahamian private sector with costly and time-consuming bureaucracy.

"I feel fairly confident, especially after consultations with BICA, that we have a happy medium for the time being," Mr Johnson told Tribune Business.

"We will continue to dialogue as we move into the new Budget cycle as to how we can enhance and adjust it so that we get sufficient insight into businesses and the returns filed by taxpayers reflect what is happening in their business. We look forward to working with BICA to making that happen."

The Government, in a bid to ensure it collects every due cent in business licence fee revenue, wants companies with an annual turnover of $10m or more to provide audited financial statements that will confirm their prior year earnings.

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, though, must also 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 Johnson yesterday said these extra measures were necessary because accounting systems, technology and processes in many companies - especially small and medium-sized enterprises (SMEs) - had failed to keep pace with The Bahamas' increasingly modern tax system and VAT-led reforms.

He explained: "What has been the experience is the level of bookkeeping and accounting by persons in the business community has previously not had to comply with taxation standards; it's all been for their own consumption.

"Once we implemented the various tax reforms that called for more reporting, we didn't necessarily see the level of accounting required from those businesses that were impacted. They did their own books, and were not engaging accountants.

"That spoke to the quality of the returns we were getting," Mr Johnson continued, "and when we put you to the test by audit a lot of companies were lacking. As our tax system evolves, it will be incumbent upon the entire business community to ensure they're making use of basic software to keep records for the Government and themselves, and invest in ensuring they have the right bookkeeping practices in their business. That's going to be even more important as we go forward."

The top Ministry of Finance official said that while VAT returns provided a useful "cross-check" on Business Licence filings, the former did not capture transactions such as those involving real estate, meaning this could not be relied upon 100 percent.

"We need, and are encouraging, businesses themselves - small businesses - to get into the habit of keeping proper books, not just for the Government but for themselves, and if they find themselves in the position of being audited they have sufficient information to defend the filing they've made," Mr Johnson told Tribune Business.

Michael Maura, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chairman, told Tribune Business on Tuesday that while legitimate businesses appreciated the Government's efforts to crack down on tax dodgers and cheats, the enhanced business licence reporting requirements threatened to further over-burden the private sector and Department of Inland Revenue with unnecessary bureaucracy.

"The challenge we have, hearing from our business community, is that this is just another level of red tape to doing business in The Bahamas," he said. "And, notwithstanding the admirable objectives of the Government, the Department of Inland Revenue has its own challenges in trying to keep up with the amount of red tape.

"It's extremely frustrating to businesses. I think the business community, in many cases, are scratching their heads, wondering what's next and when will it end. When will it actually be easier to do business?"