The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading accountant yesterday said fiscal reform was inevitable, telling Tribune Business: “You cannot run the modern Bahamas on a tax system 40-50 years old.”

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business that VAT would likely be an enormous cultural shock for many in the private sector, as businesses “for the first time” are being forced to keep accurate accounting records.

He disclosed that relatively few companies fulfilled the record-keeping requirements of the Business Licence Act, given the Bahamas’ history as a “minimal tax environment”.

And Mr Gomez questioned, whether VAT returns would operate in the same way as the current Business Licence fee, where firms with an annual turnover exceeding $500,000 were required to hire an external auditor to sign off/certify their financials.

While not backing VAT specifically, Mr Gomez said tax and fiscal reform was necessary if the Bahamas was to keep pace with the infrastructural and social demands of the 21st century.

“You cannot run the modern Bahamas on a revenue system that’s 40-50 years old,” Mr Gomez told Tribune Business. “We need a more modern system to meet the needs of the country in the 2014.”

James Gomez, a fellow Baker Tilly Gomez partner, added: “Our economy has grown so much on the existing tax platform, the cost to operate it is far more significant than 10-15 years ago.

“We need to find revenue to cover these additional costs, and successive governments, for the most part, have not done a good job in allowing the necessary time to debate the issue, so people don’t feel closed in, these decisions are coming down whether you like it or not. We need to have more advanced planning and strategising.”

While the private sector and the Government appear ‘as one’ on the need for fiscal reform, and an increase in the latter’s revenues, they differ significantly on the ‘what’ and the ‘how’.

While the Christie administration appears set on VAT, the Coalition for Responsible Taxation and others have pushed a payroll tax and other options as their preferred reform alternative.

With the Government continuing to push forward on VAT, Craig Gomez, speaking during the visit to Nassau of the network’s global president and chief executive, Geoff Barnes, said: “Baker Tilly Gomez must become an expert on the issue.

“If it is the case that the die is cast, there has to be top level advice being given to corporate clients as it is introduced into their corporate structure.

“We have an opportunity to become renowned, known for the provision of top quality expertise in this service.”

Given its position as the world’s eighth largest accounting network, with annual revenues of $3.4 billion and affiliates in 140 countries, Baker Tilly, in common with the other large firms, is well-placed to provide VAT expertise to its Bahamian units.

Craig Gomez added: “VAT in the Bahamas is not VAT for the first time in the world. Many jurisdictions have a VAT programme, Baker Tilly is in 140 countries around the world.

“We are almost mandated by the chief executive [Mr Barnes] to become knowledgeable about VAT and how it’s going to work in the Bahamas.”

In a nod to the considerable private sector and public opposition to a Bahamian VAT, Craig Gomez told Tribune Business: “The issues and concerns in the marketplace arise because many businesspersons are not fully aware of the issues, the calculation methods, the rates. There’s significant confusion in business places.

“It is incumbent, as the chief executive has said, that Baker Tilly Gomez positions itself to advise its clients and, in many respects, the decision makers on how best to implement and operate the VAT system.”

Craig Gomez said Baker Tilly Gomez had to-date received just “general inquiries” from its clients on VAT.

But, once the final legislation, regulations and Tariff Schedule were published, he pledged that Baker Tilly would stage a client seminar on VAT and all related issues.

And Craig Gomez questioned “at what level” will VAT registrant firms be required to hire an accounting firm/Bahamas Institute of Chartered Accountants (BICA) member to certify their returns and that they are in compliance with the law.

Firms with an annual turnover exceeding $500,000 have to do this for their annual Business Licences, and the Baker Tilly Gomez chief also warned that VAT’s record keeping requirements would be “a big issue”.

“Heretofore we were a minimal tax environment,” he told Tribune Business. “In developed countries, because of the sophisticated environment, companies have to keep accounting records.

“In a country like the Bahamas, it has not been necessary from a government standpoint for businesses to keep records.

“With the Business Licence, only certain companies have fulfilled their legal obligations. Now, for the first time, companies will be compelled to keep accounting records. This is the first time we will have a system that forces us to keep accounting records.”