The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading businessman yesterday urged the private sector not to use the wait for long-promised Value-Added Tax (VAT) legislation as “an excuse” for inaction, and warned: “Brace yourself.”

Franklyn Wilson told Tribune Business that management in all the companies he held equity in had been given three months to present an evaluation of the new tax’s likely impact on their operational and financial models.

Arguing that there was already enough information on VAT in the public domain, Mr Wilson said his businesses were investigating whether “vertically integrated” organisations would fare better under the Bahamas’ proposed new tax structure.

And he added that there “ain’t no question” that VAT would “breed” a new industry for the Bahamas, namely tax accountants, whose job will be to scour the new laws and regulations for ways to legitimately save their business clients thousands of dollars.

While many have complained that they are unable to fully determine VAT’s likely impact on their business without first seeing the necessary legislation, Mr Wilson warned: “I urge the business community: Don’t use that as an excuse.

“Study the principles. The details, yes, they matter, but the principles are out there.”

Mr Wilson was referring to the Government’s VAT ‘White Paper’, which provides the outline for how the tax would work, and be implemented, in practice.

He argued that this provided enough for companies to “evaluate your options”, and craft an initial strategy, prior to the release of more detailed VAT legislation and the accompanying regulations.

Also suggesting that the Bahamian private sector should not seek to blame a lack of preparation on the planned July 1, 2014, implementation deadline, which many view as aggressive, Mr Wilson said: “Let’s be careful about using the Government, the slow pace and the time as an excuse.

“Study what you have. No Minister of Finance anywhere in the world says: ‘We’re in the process of giving you this much time’. That’s not the way taxes are done anywhere in the world. Brace yourself. That’s the key.”

Mr Wilson, the Arawak Homes and Sunshine Holdings chairman, is also a substantial investment in other prominent companies, such as BISX-listed FOCOL Holdings and RoyalStar Assurance.

He disclosed to this newspaper that all companies in which he was invested had begun their assessment of, and preparations for, the likely impact from the Government’s tax reform centrepiece.

“Every company with which I’m involved, management of those entities, especially the chief financial officer, has been mandated to evaluate with some speed and, in the next three months, be in a position to make a meaningful presentation to the Board of each company so that we could get a sense as to what the impacts are,” Mr Wilson said.

One issue being assessed by all his investments is whether so-called ‘vertically integrated companies’ - firms bound to each other via a product/supply chain - would fare better than standalone entities under a VAT.

“The first thing I am hearing is that businesses that are vertically integrated may have an advantage over those that are not, doing things internally as opposed to having them contracted from outside,” Mr Wilson told Tribune Business.

“I don’t know that to be a fact. We have heard that’s a principle that management in each company should consider as an option. I’ve passed that on to people working in the various businesses I’m involved with to see if there’s validity or not.”

Coming from an accounting background himself, Mr Wilson said VAT’s arrival would create more work for the profession - and not just on the auditing and systems aspects.

He suggested that VAT, and the increased complexity it will bring, would create opportunities for Bahamian accountants to legally advise business clients on ways to exploit ‘loopholes’ for legal tax avoidance.

“Critical to accounting is to recognise that taxes happen,” Mr Wilson said. “The reality of accounting is that when taxes are introduced, it is prudent to look - on behalf of your firm and the client - for legal ways of tax avoidance.

“If the tax system of the Bahamas becomes more complex, it will breed a new industry of tax accountants. I invite businesses to use this opportunity to lean more on their accountants; go to them more for advice.

“There ain’t no question that’s going to happen. No government can introduce a tax where they can achieve all they set out to achieve. The tax accountant’s job is to see that doesn’t happen,” Mr Wilson added.

“It’s called tax avoidance. It’s for every business to look for legitimate, strategic means to avoid the tax. That’s what will happen.”

He drew a distinction between avoidance, which results from legal tax planning, and tax evasion, which would be illegal.

And, in the case of FOCOL, Mr Wilson said it would be up against multinational companies in the shape of Rubis (French) and the Sol Group (Barbados) that were already familiar with operating in a VAT environment.

He suggested its two competitors would have an advantage when it came to VAT planning, and said the BISX-listed company would have to “learn legitimate ways of avoiding tax” as fast as its rivals.