The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The revised Value-Added Tax (VAT) Bill contains new clauses seemingly designed to prevent political interference in the pursuit of delinquent taxpayers, while also preventing such persons from leaving the Bahamas.

A Tribune Business review of the draft legislation and regulations tabled in the House of Assembly last week found several key insertions and important changes to the package that was released for public consultation in November 2013.

Among the highlights is a new Section 15, which limits the minister of finance to giving “general” policy directions to the VAT Comptroller.

It prevents the minister from “intervening” in the newly-established VAT Department’s daily operational, collection and enforcement efforts, and from “participating in and influencing” decisions concerning specific VAT registrants and taxpayers.

On the surface, this appears designed to prevent political interference and the protection of VAT delinquents with the right political and family connections.

Whether this will operate as intended in practice is another question, and the proverbial ‘proof of the pudding will be in the eating’, as the minister can still request information on particular taxpayers by writing to the Comptroller.

And, on the flip side, while seemingly minimising the ‘political interference’ aspect, the Bill hands enormous power and influence to whoever the Government appoints as VAT Comptroller.

For the Bill allows him to override the Data Protection Act and obtain information held by any other government agency, and his requests cannot be refused.

The Comptroller can also determine and publish ‘VAT Rules’ as he sees fit, ensuring the Gazzette. Regulations, though, will take priority over these ‘Rules’.

These ‘Rules’ can determine when a registrant can defer VAT payments, and for how long, and if a bond or other security must first be posted to access this benefit.

The Comptroller can also require banks and financial institutions to provide him with a VAT payer’s bank account and financial information, overriding all confidentiality and legal privilege protections.

Accountability will likely be an issue, although aggrieved taxpayers will be able to appeal the Comptroller’s decision to the VAT Appeals Commission and, ultimately, the Supreme Court.

The Comptroller, according to the new legislation, will be appointed for a five-year term, which can be extended by the Government into a second term of the same length.

New lines in the revised Bill require the VAT Department to be “a performance-based meritocracy”, operating in an efficient and transparent manner, and “maintaining a high level of public confidence” in the VAT system’s integrity. Again, it remains to be seen if all this translates into practice.

The Bill also contains a new section 64, which confines delinquent VAT payers to a ‘tropical gulag’ until they settle the sums owed.

The legislation states that persons owing the Government VAT monies “may not leave, or attempt to leave, the Bahamas for an indefinite or prolonged period of time” until they pay the outstanding balance or reach a payment arrangement with the Comptroller.

This appears designed to prevent foreign owners of Bahamas-based businesses, as well as Bahamians. from running away from their VAT liabilities, but it could well spark legal action on constitutional and human rights grounds.

“Where the Comptroller has reasonable grounds to believe that a person liable to pay tax outstanding under this Act may leave the Bahamas for an indefinite or prolonged period without paying such tax, [the Comptroller] may] issue a certificate in the prescribed form to the Commissioner of Police and the Immigration director, requesting the Commissioner and director respectively to take such steps as may be necessary to prevent the person from leaving the Bahamas” until due payment is made, the revised Bill states.

Those who attempt to flee the Bahamas without making due payment will face either a $100,000 fine or imprisonment for up to a year.

And, just to make sure the Government collects what is due, it has inserted a new Section 66 into the revised Bill to allow the VAT Department to take a lien over any delinquent taxpayer’s assets that are within the administration’s possession.

The Bill says from the date VAT monies become due, and until they are paid, the VAT Department has “a lien on the assets in the possession or control of the Customs Department or any other government entity”.

This lien extends to assets belonging to persons ‘related’ to the delinquent taxpayer, if the Comptroller “reasonably believes” the latter beneficially owns them or has merely transferred them to conceal their ownership interest.

The Bill also contains a new Section 9 to allow Grand Bahama Port Authority (GBPA) licensees to claim refunds from VAT paid on goods subsequently sold bonded to other licensees.

This is designed to protect Freeport’s ‘over-the-counter’ bonded goods system and licensee rights under the Hawksbill Creek Agreement.

Yet to be able to claim VAT refunds, they must first register with the VAT Department.

Also new is Section 51, which appears designed to ensure VAT does not get in the way of new business investment and mergers and acquisitions.

Persons investing in new businesses can claim VAT ‘input tax’ deductions on supplies and imported goods made in the 24 months prior to the new business being registered with the Comptroller.

Other key changes include:

• The Government has tweaked its VAT enforcement structure, although this is mostly in name only.

Instead of a ‘VAT Division’ within the Central Revenue Agency being responsible for the tax’s collection and enforcement, it will now be a VAT Department charged with this responsibility. This will be headed by a VAT Comptroller, not a Commissioner.

The proposed Revenue Court has also been abandoned in favour of a VAT Appeals Commission, followed by a direct appeal to the Supreme Court.

• The VAT Appeals Commission will have three commissioners - an attorney, who will chair it, an accountant and a businessman. They will be appointed for five years, and can be re-appointed for the same duration, but serve no more than 10 consecutive years.

• While the November 2013 Bill contained separate fines for individuals and companies found guilty of committing any of the 50 ‘administrative offences’ listed by the Government, the revised legislation does not.

Individuals will now be faced with paying the same, albeit higher, fines levied on companies.

• VAT accounting records must now be kept for five years, not seven as stated in the November 2013 Bill. This is likely intended to bring the legislation into line with other laws, which require accounting records to be kept for five years.

• While the Government has moved to eliminate VAT on intra-group transactions by allowing corporate groups to register to pay VAT as one entity, there are some restrictions on this.

Group registration will not be allowed where GBPA licensees and non-GBPA licensees, and Bahamians/residents and foreigners, form part of the same group.