The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Frustrated businesses slammed yesterday’s newly-released Value-Added Tax (VAT) Rules for introducing previously unknown requirements with just three working days left before the new tax regime’s roll-out.

Rick Lowe, Nassau Motor Company’s (NMC) operations manager/director, told Tribune Business that the auto industry had not known they would have to apply, and post a performance bond, for the deferral of VAT paid at the border.

He said both these conditions were revealed yesterday morning by the VAT Rules, which require that auto dealers lodge a bond equal to “100 per cent of the estimated VAT payable” to the Government in their filing period.

“We didn’t know the details until today,” Mr Lowe fumed to Tribune Business. “We thought they may want a bond and we would have to go through a vetting process, but they didn’t tell us that definitively. They only said we’d be deferred.”

The last-minute details, which potentially leave the entire Bahamian auto industry and other businesses ‘in limbo’ when it comes to deferring the VAT they would normally pay at the border, was among the issues due to be raised at yesterday’s meeting between the private sector and Ministry of Finance on all outstanding VAT issues.

Similar applications will also be required from businesses wanting to participate in the VAT-Free shopping scheme targeted at tourists, with their participation subject to Comptroller approval, being in good standing on all taxes and a host of other conditions.

Mr Lowe, meanwhile, told Tribune Business that despite sending out requests, NMC had yet to obtain the necessary application form.

“That’s what they told us this morning,” he reiterated. “That we have to do an application. How many of these days are they going to be working for?

“It’s mind-boggling that they want to make you accountable for every other detail. It’s simply bizarre. But, Mr Taxpayer and Citizen, you must stand up and give unto Caesar, no matter what Caesar wants.”

Gowon Bowe, the Coalition for Responsible Taxation’s co-chair, yesterday agreed that it was “unfortunate” that the Rules - billed by the Government as integral to how VAT will operate in practice - had been released just eight days before implementation.

In practice, a generous estimate gives just three working days before VAT implementation for businesses to adapt to the Rules’ requirements, again suggesting that the 7.5 per cent levy’s introduction will be anything but smooth come January.

“It’s good that we have them,” Mr Bowe told Tribune Business of the VAT Rules, “but it’s a bit unfortunate that we only have them now, on the eve of Christmas.

“It will be a bit difficult for persons to go through them and give feedback. Certainly, for businesses waiting for these to clarify open matters, it does not give them a lot of lead time to address them.”

The auto industry is clearly one of them, as it had been relying on the ‘deferral at the border’ to boost cash flow and avoid capital being tied-up in slow moving items.

“It’s going to be a nightmare,” Mr Lowe told Tribune Business. “There seems to be so much duplicity in this. If we’re all in this boat together, we don’t want to be on a sinking ship.

“We go to them, bare our souls, and give them all this information because we want to be decent, upstanding taxpayers. They they tell us one thing, and turn around and it’s a different story. Come on.”

Tribune Business understands that yesterday’s Coalition meeting, held before the late afternoon version with the Ministry of Finance, was “very despondent”.

Several industries, including the marina operators and attorneys, are understood to have expressed concern that the Government had either not addressed their concerns or had reversed previously communicated VAT-related positions.

“It’s kind of unconscionable,” Mr Lowe said of the Rules. “It only proves the complexity of this tax system, and the disruption it causes.

“It may level out and people get used to it in a couple of years, but that is not the point. I’ve never bought into the argument that the country needs to do something with the tax system. Step one should be for the Government to get its fiscal house in order, like the rest of us have to.

“What’s the point in being honest and forthcoming if they completely ignore you?”

Other concerns pointed out to Tribune Business yesterday included the fact that all invoices must include the ‘recipient’ company’s Taxpayer Identification Number (TIN) if they are a VAT registrant.

This now gives firms a week to adjust their computer systems so they can place potentially hundreds of client TINs on invoices.

As for the insurance industry, while the Government is allowing them to claim ‘input tax credits’ on policy categories that will be treated as ‘exempt’ for the first six months of 2015, they can only apply for them post-July 1.

General and health insurers may thus experience early 2015 cash flow issues, and will have a 12-month period after end-June when they can claim these input tax credits.

The amount of collective input tax credits claimed cannot exceed the gross premium taxes assessed during the first six months of 2015.

One senior insurance industry source, commenting on the “tremendous” cash flow implications yesterday, said: “I just hope to goodness we don’t have a hurricane before July.

“We’re going to work through it; we don’t have a choice. It’s going to take months to a year to get this thing working properly, if they don’t keep changing the rules. Yet they keep changing the playing field. It’s going to be a nightmare.”

Mr Bowe, though, said the insurance industry would ultimately recover the input VAT paid during its first six ‘exempt’ months.

“I don’t think the insurance entities will see that as a big element,” he told Tribune Business. “At least they have that clarity they will not lose the input VAT sustained by them.

“It may be a cash flow issue for them, but it’s not a big issue. But they have quite a number of matters to get through.”