The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian companies wanting to exploit the Government’s proposed ‘virtual warehouse’ transition plan will find it almost impossible to do so because Value-Added Tax (VAT) registration has yet to start.

The ‘virtual bonded warehouse’, designed to eliminate ‘double taxation’ and higher import tariff rates for Bahamian retailers and wholesalers, can only be accessed by companies who have properly registered for VAT.

Yet that process has yet to start, and with Customs and the Ministry of Finance stipulating that firms must apply to use the ‘virtual warehouse’ by October 15, there is just a three-week window for companies to get registered and be eligible to access it.

Gowon Bowe, the Tax Coalition’s co-chairman, told Tribune Business that the Government would have to “look seriously” at extending the October 15 deadline due to the fact that VAT registration has yet to begin.

Acknowledging that the Government’s failure to begin VAT registration to-date would make the mid-October ‘virtual warehouse’ goal “very difficult to achieve”, Mr Bowe said the private sector had yet to fully embrace the concept yet.

“That has not yet been wholeheartedly accepted by the retailers and wholesalers,” the Coalition for Responsible Taxation co-chair told Tribune Business. “We’re not at that point yet.

“That’s one that’s not been fully accepted and digested by the business community. There’s some concerns, and we need to work through how it works in practice.”

Under the virtual warehouse plan, companies importing inventory during November and December 2014 will not pay the Excise Tax/duty normally due at the border.

If products imported during this ‘two-month window’ are sold at any time prior to January 1, the business will pay the current duty sum/rate at the time of sale. For those products sold post-VAT implementation date, and which have revised tariffs, the business will pay VAT plus the new duty rate at time of sale.

“It’s an olive branch, and more digestible than what was originally proposed,” Mr Bowe told Tribune Business. “But there’s still got to be a lot of dialogue.’

He acknowledged, though, that the electronic registration of mandatory VAT payers had yet to begin – and it was “not entirely clear” when this process would start.

The Ministry of Finance and its VAT Department are currently meeting the largest businesses that will be their top taxpayers, obtaining their details and information for registration.

“It is not available to register online, and that does not appear to be imminent,” Mr Bowe said, adding that a manual VAT registration process could be handicapped by a high volume of businesses seeking to register –including those wanting to use the ‘virtual warehouse’.

“It’s going to hinge on how quickly they can get the registration process up and running in the next five days,” Mr Bowe told Tribune Business.

“The registration process training and education module is not rolled out. From that perspective, it’s [the virtual warehouse application] one we’re going to have to look at seriously, because it’s very difficult for people to achieve that [October 15].”

Provisions held in ‘virtual warehouses’ have to be certified by an accountant licensed by the Bahamas Institute of Chartered Accountants (BICA), and Mr Bowe said businesses would have to know how their unit system was working, what was coming in and going out, so this could be reported on January 1. Companies may also have to post a bond with Customs.

“It’s still going to require a number of elements to be put in place in the next couple of months,” Mr Bowe added.

The Government itself realizes that the private sector is not entirely happy with the ‘virtual warehouse’ proposal, with businesses wanting a four-five month period – rather than two – to match their inventory turns.

A spokesperson for the Ministry of Finance said: “The two months period for qualifying stocks is less than what most businesses would want.”

However, they added that the managed timeframe was intended to contain Customs’ administrative costs and minimise risks for fraudulent loss of government revenues, while still allowing consumers to benefit early on from the duty reductions.