The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s move to eliminate Value-Added Tax (VAT) on transactions between companies in the same corporate group is a concession to Business Licence reforms pushing the same entities into a higher tax bracket, Tribune Business was told yesterday.

Gowon Bowe, the Tax Coalition’s co-chair, told Tribune Business that the Government wanted corporate groups, with multiple subsidiaries, to consolidate their revenues and pay a single Business Licence fee.

While likely simplifying administration for the Government, and complementing its plans to allow corporate groups to file a single VAT return, Mr Bowe said the Business Licence reforms risked pushing such entities into a higher tax bracket.

Noting that some such groups had already expressed unhappiness over the prospect of an increased tax burden, Mr Bowe described the Government’s elimination of intra-group VAT as a concession to such concerns.

“They’ve said with the Business Licence that they want them to consolidate revenues, which may push them into a higher tax bracket,” Mr Bowe told Tribune Business of large corporate groups.

“There’s a bit of give on one side, take on the other..... You don’t want taxation at the intra-group level.”

Mr Bowe said that requiring large corporate groups to detail transactions between their subsidiaries, and the VAT incurred on them, also made their returns/filings to the Government “messy”.

“Looking at external sales and external expenditure gives a more truer picture of what the tax should be,” Mr Bowe, a PricewaterhouseCoopers (PwC) Bahamas accountant and partner, said.

Backing many of the ‘macroeconomic’ level reforms made by the Government to its 7.5 per cent proposal, the Tax Coalition co-chair said private schools may petition against being treated as VAT ‘exempt’, as this would likely exacerbate existing pressure on fees.

“Given that the [exemptions] list is significantly reduced, that’s the most positive thing,” Mr Bowe told Tribune Business. “I think the goods side is the most positive element. It doesn’t add complexity to the retail and wholesale industry, who thought it most cumbersome in terms of bifurcating exempt and VAT-able goods.”

Mr Bowe said it was “critical” for the three-person Task Force, which the Government wants to lead the VAT education campaign, to be established as rapidly as possible.

Calling on the Government to “move with urgency” on naming the three, Mr Bowe said Prime Minister Perry Christie had indicated to him earlier this week that they still had to be selected.

With MPs likely to be given “quite a bit of time” to digest the VAT Bill and accompanying legislative package before the Parliamentary debate, Mr Bowe said the Task Force would play a vital role in channelling feedback to the Government as opposed to “every Tom, Dick and Harry” give their response.

He also backed the Government’s intention to link VAT returns/payment filings to turnover, as Tribune Business exclusively revealed earlier this week

Companies with a gross annual turnover that exceeds $5 million will have to submit monthly VAT returns.

Those with an annual turnover between $400,000 and $5 million will have to file quarterly VAT returns, with VAT registrants earning less than $400,000 in annual sales having to file twice yearly or once every six months.

The Government has thus moved to make good on its promises to reduce the reporting burden on small and medium-sized Bahamian businesses who meet the VAT registration threshold, will also reducing the bureaucracy it will face at its end.

Those VAT registrants with an annual turnover of $400,000 or less will be able to calculate their VAT liabilities on a cash accounting basis, using one of two methods.

They can either calculate their VAT inflows and outflows at the set 7.5 per cent, use a ‘Flat Rate Scheme’ where VAT is determined as a percentage of cash receipts. The rate has to be determined by the VAT Comptroller.

Mr Bowe said this move was consistent with the recommendations of both the private sector and the New Zealand consultants, and he described it as “a step in the right direction”.

He disclosed that the Coalition for Responsible Taxation had also suggested the Government follow Trinidad’s example, where companies filed returns bi-monthly, and were divided into ‘odd’ and ‘even’ month filers.

Mr Bowe said the quarterly filing for businesses with annual turnovers between $400,000-$5 million was also consistent with the Government’s quarterly Business Licence payment plan.

He expressed hope that the VAT filing proposal would ensure “small businesses are not over-burdened administratively, and generate business and economic growth, while giving to Caesar what is due to Caesar and introducing more discipline into business filing and reporting”.

Mr Bowe said that with most Bahamian companies used to filing annually, calculated steps had to be taken to “tighten the reins” as opposed to implementing a frequency busineses found it impossible to comply with.