The Tribune

EDITOR, The Tribune.

As the manager of a VAT compliant, small business in The Bahamas I deal with VAT every day. For reference purposes, my position encompasses hiring, firing, ordering, accounts payable, accounts receivable. I do it all. My job since VAT has tripled in administrative processing – specifically in the accounts department.

Accounts Receivable for example, any funds not collected as of the twenty-first day of the filing month must come out of pocket. Most companies within The Bahamas extend a 30-day credit for charge customers and many small businesses (“mom ’n pop stores”) need those 30 days to collect sufficient funds to pay their bills.

With this said, the “VAT due” for any customers who have not paid by the 21st day become the burden of the seller/business. Can this be avoided? No. As mentioned many Mom ’n Pop stores need the 30 days to acquire sufficient funds to pay these bills, changing the credit terms does not provide sufficient funds for these stores.

As a matter of fact it will create finance charges – more bills. So the Seller is left to foot the bill for its customers who are unable to pay within 15 or 21 days. It could be argued that the Mom ’n Pop stores do not carry enough “VAT due” to make a difference; the point here is any accounts not paid in time for a VAT filing become the burden of the seller.

Accounts Payable for example, all VAT is to be paid in advance and although most can be reclaimed, again for many small businesses these funds are what used to be operating capital.

In other words, these VAT funds are tied up for three months at a time. For some companies, this may mean the difference of hiring another employee, giving an employee a deserved bonus, investing in more efficient equipment or most importantly performing necessary maintenance whether on building or equipment.

How about the December quarter when every business has to begin the forever process of business license and all the expenses involved in this? For some businesses, this can make the difference. Small businesses make up the community, large corporations depend on the purchases of smaller companies; you can’t have one without the other. The harder it becomes for Small Businesses to operate, the harder it will become for large companies to maintain; and time will tell this aspect.

It was mentioned in a conversation of the same that in Abaco alone almost 20 small businesses did not renew their business license in 2015 because they knew they could not afford the added expense. Let’s assume that only ten companies in Abaco did not renew their business license and that these ten companies only employed three employees each, this means that thirty families experienced job loss at the turn of the new year when the cost of living became highest.

In conversation with various businessmen, it came up that accountants had to be brought in to complete all the necessary requirements for VAT and the associated filing. Again, an added expense to the business and this one is non-recoverable. It doesn’t take an accountant to be a successful businessman, nor does it take an accountant to balance the books and maintain a successful company. It does, however, require an accountant to guide any successful businessman through VAT.

Hiring an accountant can cost anywhere from $175.00 to thousands of dollars all depending on the type of company and your knowledge of your POS and/or accounting system. This raises another expense in which many businesses had to invest, in order to accommodate VAT; a POS System. A POS System is necessary for most businesses to guarantee the correct calculation of 7.5% for each transaction. A POS System, including hardware can start at about $1,500 and can go into the tens of thousands. Further to this expense, most POS Systems carry a monthly fee per unit purchased. Again, non-recoverable costs to eliminate human error on the calculation of 7.5% on each transaction. So here we have added, non-recoverable expenses for all businesses that require a POS System to fulfil the requirement of VAT.

Finally, Time. Time is a precious commodity that most businessmen do not have to spare. Purchasing a POS System requires learning the POS System and learning requires Time. Having an accountant come in to review your books requires Time. Having an accountant setup or fix your accounts requires precious Time. Managing and dispersing an already tight budget requires added Time. Contacting valued customers to see when they can make a payment requires ... Time! Time is said to be priceless, but in the business world, all time spent on non-profit bearing activities becomes an expense. This expense often results in overtime needing to be paid out to your highest paid employees. Then comes the priceless aspect of this whole process; these most valued employees become exhausted and inefficient. Here starts the circle again – exhausted employees need one of two things: raises and/or bonuses OR assistants; any of these is an added cost to the company.

The implementation of Value Added Tax has forced heavy, long-term, non-recoverable expenses on the largest and most important sector of the Bahamian business world — Small Businesses.

ONE WHO KNOWS

Nassau,

May 5, 2015.