The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Ministry of Finance is expecting “at least” 4,0000 businesses to become mandatory Value-Added Tax (VAT) registrants, a senior official expressing confidence it has the infrastructure to handle these numbers.

John Rolle, the financial secretary, during a Ministry of Finance VAT/Tariff working session, said the majority of the 4,000 registrants are expected to be small and medium-sized businesses.

“We expect that there will be at least 4,000 businesses that register. The majority of the VAT registrants will be smaller-sized business, which means that they will be filing their returns quarterly and, in some instances, semi-annually,” said Mr Rolle, adding: “We are comfortable that we will have the capacity to deal with the numbers.”

Mr Rolle said that while Bahamians will not see the Central Revenue Agency (CRA) on day one of VAT implementation (January 1, 2015), the process of consolidating the Government’s revenue administration was continuing.

Mr Rolle said that after the revised 7.5 per cent VAT Bill goes through Parliament, the public education campaign will begin more intensively.

The minister of state for finance, Michael Halkitis, said last week that VAT registration is expected to start on September 1. He told Parliament that the Government has accepted the recommendations from the New Zealand tax experts to enlist the private sector in the public education campaign, and a three-person Task Force will oversee this process.

Mr Rolle said the revised VAT Bill, containing far fewer exemptions than originally proposed, was expected to “simplify” the VAT administration process.

Companies with a gross annual turnover that exceeds $5 million will have now have an extra week - a total 28 days - to file their returns.

Mr Rolle said businesses 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, or 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.

“The changes were made to give more flexibility to allow the VAT administrator to give smaller businesses the opportunity to file their VAT return less frequently, “ said Mr Rolle.

He added that there will a deferral payment option for some importers who qualify, but they will be required to put up a bond.

Explaining that procedure, Mr Rolle said: “Whenever you go through Customs, whatever VAT is due to government is paid right there. Whatever happens inside the country, that VAT doesn’t get into the Government coffers until the end of the VAT period when the business files it returns.

“A deferral payment option means that for the businesses that meet the qualifying standards they will not have to pay that VAT when they bring their goods across the border. There will be a mechanism to record how much VAT a business did not pay, and will ultimately have to pay.

“Whenever a business gets around to filing their VAT returns, all of those referrals will now have to be acknowledged.”

Mr Rolle added: “Businesses in our country that would typically qualify would be those that already benefit from certain incentives that are in place through various laws on the books.

“That’s not the carte blanche privilege that will be provided to the business community. Even in those cases, it’s a system where the Government says you will have to put up a bond in the event that things go wrong and the taxes are not paid. The bond is a way for the Government to recover its taxes.”