The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Tax Coalition co-chair has urged the Government “not to lose sight” of establishing the much-touted Central Revenue Agency (CRA), calling for its creation to be “the main focus” post-January 1, 2015.

Gowon Bowe told Tribune Business that the centralisation of government tax collection/administration efforts, as promised by the CRA, was vital to ensuring this Christie administration and its successors received what was legally due to them.

Greater enforcement, and improved collections, are also vital to minimising any new or increased taxes in the future, and Mr Bowe added that the CRA would also help “harmonise” government policy and laws in this area.

“When they [the Government] get over VAT implementation, we don’t want them to lose sight of getting the CRA up and running, as it’s the most important agency you could have as you reform taxation and fiscal responsibility,” Mr Bowe told Tribune Business in a recent interview.

“The main focus should be on getting the CRA up and running.”

The Coalition for Responsible Taxation co-chair did not go as far as Opposition finance spokesman, K P Turnquest, who on Wednesday questioned whether the Government was “putting the cart before the horse” in implementing Value-Added Tax (VAT) before establishing the CRA.

However, John Rolle, the Ministry of Finance’s financial secretary, while conceding that the CRA will not be established by January 1, 2015, has promised in successive presentations that its creation remains a key government objective.

It will be formed when the VAT Department is ultimately merged with the so-called ‘Inland Revenue’s’ Business Licence and real property tax responsibilities.

In the meantime, the Christie administration has opted to create a VAT Department within the Ministry of Finance, headed by a VAT Comptroller, to administer and collect a new tax projected to raise $400 million gross in its first fiscal year.

The revised VAT Bill also contains a new clause designed to prevent the Minister of Finance and other politicians from interfering with the VAT Comptroller and his officials in their enforcement activities, in a bid to ensure the new tax’s administration will be fair and equitable.

Mr Bowe, though, said the CRA’s formation would lead to better “harmonisation” of the Government’s tax-related laws, policies and regulations, as the administration would now be under one roof.

This would ensure the Government’s various taxes could adopt common best practices, while also weeding out provisions that did not work.

“When you do things in separate silos, as opposed to a common agency, you always have these provisions that need to be addressed,” said Mr Bowe, who is also a PricewaterhouseCoopers (PwC) partner and accountant.

He told Tribune Business that despite its passage through the House of Assembly, the VAT legislation and regulations were “not a done deal”.

In common with countries such as New Zealand, the Bahamian VAT Bill/Act was likely to undergo minor revisions and amendments “right up to implementation time” on January 1.

And Mr Bowe praised several MPs, such as Greg Moss, for suggesting during the House debate on the Bill that the Bahamas instead implement an income tax - as opposed to VAT - because it was more progressive and equitable.

The Tax Coalition co-chair suggested that VAT could act as a ‘gateway’ or lead-in to such taxes, as it would help impose the discipline required on a society that historically has had no experience with such rigorous taxes.

“As a society, as a nation, I think we want to look at more progressive forms of taxation,” Mr Bowe told Tribune Business.

“It’s a staged process. It’s not an immediate proposition to go from a society not used to paying direct taxation to a society where you’re filing tax forms and reporting to the Government.”

Ultimately, the experience the private sector will gain with VAT compliance could be “rolled out” to the general public via levies such as an income tax, Mr Bowe suggested, although he again reiterated that this would not happen overnight.

The Tax Coalition co-chair said the Government’s decision to amend the VAT ‘travel ban’ contained in the Bill’s Section 64 provided further evidence that it was listening to the constructive criticism from the private sector and general public.

As previously revealed by Tribune Business, Section 64 would have allowed the VAT Comptroller to prevent delinquent taxpayers from travelling until they pay off their liabilities in full or agree a settlement/payment plan that is acceptable.

The legislation stated that persons owing the Government VAT monies “may not leave, or attempt to leave, the Bahamas for an indefinite or prolonged period of time” - although it does not attempt to specify the duration that would meet this criteria.

The Government is replacing the travel ban with a performance bond that such persons will be required to post to cover their tax liabilities.

Mr Bowe backed this move, arguing that the Section 64 would have moved into a questionable area by blurring the distinction between the company/business entity owing VAT and its individual owners, directors and managers.

Pointing out that company law distinguished between the two by focusing on the corporate entity, Mr Bowe reiterated his call for the Government to punish the delinquent VAT-paying firm via the withholding of Business Licences and other permits necessary for it to operate.

Suggesting that Section 64 would also likely have been challenged on constitutional grounds, the Tax Coalition co-chair said the ‘performance bond’ amendment had brought it more into line with the safeguards in the Business Licence regime.

This, too, required persons entering the Bahamas to conduct temporary business to either pay the Business Licence fee up front or post a performance bond to cover their obligations should they leave the country without paying.

Michael Halkitis, minister of state for finance, previously said Section 64 of the VAT Bill was similarly targeted only at such ‘temporary business persons’, but Mr Bowe warned the Government not to “throw the baby out with the bath water at the same time”.

He suggested that Section 64, in the way it was written, appeared to be a ‘catch all’ provision that would ensnare all Bahamian and resident business owners, too.