The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top official yesterday acknowledged it was vital for the Government to “live up to its promises” on Value-Added Tax (VAT) refunds to further solidify private sector confidence in the new tax regime.

John Rolle, the VAT Comptroller, told Tribune Business that despite a “fairly smooth roll-out” from the Government’s perspective, Bahamian businesses needed to have a positive experience over the ‘full cycle’ if they were to fully trust the new regime.

This, he said, meant ensuring they encountered a relatively trouble-free process when it came to filing their returns and remitting the due amount of VAT to the Government.

Registrant companies with an annual turnover greater than $5 million will go through this next month, as they will have until end-February to file their monthly return for January and submit due payment to the Government.

And Mr Rolle suggested it was even more important that the Government meet its pledge to provide VAT refunds within one month of a claim being submitted.

Timely refunds, which will be paid when a company’s ‘input’ VAT payments exceed its ‘output’ tax payments, are vital to business cash flows.

Consistent refunds will likely only be incurred by Bahamas-based exporters, whose products are zero-rated for VAT purposes, but providing them on a timely basis will be key to a cash-strapped government fostering private sector confidence that it can live up to its end of the bargain.

VAT refunds, for example, have become especially problematic in Barbados, a Caribbean country in an even worse fiscal position than the Bahamas, with businesses having to wait months - and sometimes years - for due compensation.

“It’s been a fairly smooth roll-out,” Mr Rolle said of VAT, “and it’s very important in the early period to provide the reinforcement that businesses need to get things right.

“It’s a major change where the experience carries the weight, rather than trying to exceed people’s expectations of how it should go.”

While most government and private sector attention pre-implementation focused on getting mandatory VAT registrants through the registration process, that is now shifting to the practical mechanics of how the new tax regime will operate.

“There is more that needs to be done,” Mr Rolle told Tribune Business. “Businesses have yet to file their returns and will be monitoring how this proceeds.

“For us, it’s going to be very important that the refund mechanism lives up to what has been promised, and businesses continue to file and interact in terms of accounts and filing, and the convenience the system is supposed to offer is there.

“Businesses are going to be monitoring their experience on a monthly basis with filing, and that’s where we’re going to have to be ready.”

Mr Rolle emphasised that the Ministry of Finance and its VAT Unit were providing businesses with positive reinforcement to bolster confidence, and not employing a ‘heavy handed’ approach to enforcement.

“There is a recognition there is a learning curve,” he added. “We’re giving businesses positive feedback. It’s not about just a ‘stick’ approach.”

However, Mr Rolle confirmed to Tribune Business that the VAT Unit was “in the process of writing letters” to mandatory business registrants who had failed to meet the November 30 registration deadline.

“Some of those received letters which include fines attached to those letters,” he said, adding that only large and medium-sized businesses would be subject to these sanctions.

“We know the education process has to reinforce the way it’s supposed to be done,” Mr Rolle said of VAT. “We’re doing the rounds of business establishments, and monitoring their progress. We know there is a learning curve.”