By NEIL HARTNELL
Tribune Business Editor
Sir Franklyn Wilson yesterday voiced fears about renewed “tardiness” relating to VAT refunds, warning that the issue “could shake” still-fragile business and investor confidence.
The Arawak Homes and Sunshine Insurance chairman, emphasising that he was talking about the broader economy, told Tribune Business he had attended two board meetings in the past two working days where the company’s chief executive was complaining about its inability to receive timely VAT refunds from the government.
Pointing to the significant negative effects on a company’s cash flow if large sums were tied-up in VAT, Sir Franklyn said it was vital that the Minnis administration reassure businesses they will receive what is due to them in the timeframe expected.
“I’m beginning to get concerned over the frequency with which I hear business people complaining about the tardiness of the government in refunding VAT payments,” Sir Franklyn told this newspaper.
“By coincidence, in the last two business days I attended two board meetings and, in both instances, the chief executive was making the point that the company’s cash flow was being adversely affected by the inability to get VAT refund payments on a timely basis.
“It’s my hope that the appropriate authorities might do or say something to help give the private sector confidence that they can rely on the refunds being made in a timely manner.”
His comments came as the Bahamian insurance industry seeks to avoid its own specific legal collision with the government over both VAT refunds and the tax treatment applied to the industry by the Department of Inland Revenue (DIR).
Sir Franklyn, a principal in the majority shareholder of RoyalStar Assurance, the Bahamian property and casualty underwriter, revealed: “I am aware that there is a particular problem as it relates to the insurance industry, but I believe in good faith that the parties are seeking to find a way to resolve that, including seeking the assistance of the court.”
Warren Rolle, the Bahamas Insurance Association’s (BIA) newly-elected chairman, yesterday confirmed that while VAT-related legal action was a possibility the sector was seeking to avoid such an outcome.
Mr Rolle, who is also NUA Insurance Agents & Brokers’ managing director, said: “We’re hoping it doesn’t get to that. It’s something we’re currently taking advice on.” He declined to comment further, but suggested he would say more on the subject at a later date.
Insurance industry sources, speaking on condition of anonymity, said the “bulk” of the issues between the sector and the Government related to the VAT refunds it believes remain due and owing on Hurricane Matthew claims dating from October 2016.
They added that there were also concerns over how the tax is being “construed and interpreted” by the Department of Inland Revenue (DIR), especially now that the property and casualty segment is being treated as VAT ‘exempt’.
Kevin Seymour, the former Grand Bahama Chamber of Commerce president, told Tribune Business last year that the Government had effectively “trapped itself” by applying VAT to property and casualty insurance premiums.
Lacking the necessary cash flow to meet the sector’s credit/refund claims, he said it was now resorting to demanding that companies who received Hurricane Matthew claims pay VAT from these proceeds.
Mr Seymour said that among the many unintended consequences of this move was the imposition of VAT on cross-border, inward bound foreign exchange inflows that were vital to the Bahamas’ post-storm recovery.
Besides seemingly violating the VAT Act’s intention that the tax only be imposed on economic activity within the Bahamas’ borders, Mr Seymour said this was also resulting in the repatriation of a portion of the claims proceeds back to the foreign reinsurer. And companies were also having to ‘eat’ VAT on business interruption insurance payouts.
Sir Franklyn, meanwhile, said his concerns went beyond the insurance industry to the broader economy. “Every company operates on the basis that VAT receivables from the Government are as near to cash as you can get,” he told Tribune Business yesterday.
“If that turns out not to be the reality, it could shake a lot of commerce in the country. I make these comments in a public way because I believe, in the interests of the economy more broadly, the authorities provide some evidence and assurance that any hiccups are being addressed and refunds will happen as the private sector has been led to believe they will.
“The implications are significant. My genuine interest is that the governance of the country takes place in a way that fosters national development. I bring this to the authorities because they may not be aware of it. Hopefully, they should be aware of it and prevent it from becoming a problem.”
Concerns over VAT refunds are nothing new, having surfaced before with the cash-strapped Public Treasury struggling to meet multi-million dollar refunds and credits built up by the private sector.
Both Michael Maura, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, and its newly-appointed chief executive Jeffrey Beckles, both said they were unaware of renewed VAT refund concerns as expressed by Sir Franklyn.
Mr Maura said just because he had heard nothing recently means “the issue has gone away”, while Mr Beckles said he had been surprised at how quiet the “VAT refunds” situation had been since his appointment - apart from a solitary complaint at the recent Bahamas Business Outlook conference. Both men promised to investigate.