The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Companies will be allowed to make ‘upfront’ VAT input credit claims prior to the sale of a particular item, a senior Ministry of Finance consultant said yesterday, noting that they would not necessarily be put “out of pocket”.

Bahamian businesses have expressed fears that Value-Added Tax (VAT) will cause a cash flow issues, as they may have to use working capital and profits to cover tax payments on sales they never receive.

But Pauline Peters, a Ministry of Finance consultant, told Tribune Business yesterday: “Businesses are allowed to claim the input credit they would have paid during the particular month, whether it was on the import or on the domestic purchases.

“They are able to claim that upfront even before the items that they may have paid it on is actually sold. You would find a situation where, if there are large imports or large purchases in a domestic economy, businesses claim all of that upfront - even on the capital items, expansions etc.

“The businesses are not necessarily put out of pocket in a sense because they may not have to submit any output to the Government in that instance. They claim all of that. They may not have collected sufficient to make a payment to the Government so they are not necessarily out of pocket.”

Ms Peters, who was a presenter at a VAT-focused session at the Bahamas Institute of Chartered Accountants (BICA) week, added: “There is no real disadvantage except in the cases where there are businesses that may have been receiving concessions before.

“They may not have been paying any tax on the importation of raw materials. Now they may be required to pay that up front, and that’s where you may find a cash flow situation coming in. Right now, businesses pay their duties on all of their goods and, in a similar way, the VAT will be collected up front, so it should not put them out of pocket.”