The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) will become “a fruitless exercise” unless the Government acts immediately against companies that breach its new tax law, a top private sector executive has warned.

Edison Sumner, the VAT Education Task Force’s co-chair, told Tribune Business that “enforcement and compliance must happen” from the get-go if the Government’s tax reform centrepiece was not to be “compromised”.

If that happened, Mr Sumner warned that compliant companies would rapidly lose confidence in VAT and its efficiency/fairness, and the system would be subject to “scapegoating”.

The Task Force co-chair added that non-compliance with existing taxes had been a key contributor to the Bahamas’ recent $400-$500 million fiscal deficits, and warned: “We don’t want to go down that road again.”

“It’s very important again that they demonstrate the capacity of the VAT Unit to enforce the rules and have authority over the process,” Mr Sumner said, following the March 2 deadline for monthly filers to submit their first-ever returns.

“They have to regulate businesses that should have, and have not, filed their returns. This is an exercise we will be looking at very carefully to demonstrate to all that the VAT Unit is serious enforcement of the law and to cause companies that should have filed to do so.

“The last thing we want to see at this stage is an early scapegoating of the system, and if that happens we could see others take advantage. The VAT Unit’s compliance team, and their personnel down there, must be seen to enforce the law.”

John Rolle, the acting VAT Comptroller, confirmed to Tribune Business via e-mail that several monthly filers had missed the March 2 deadline to submit their returns and due tax payments.

He added that several companies had requested filing extensions, but up to press time had provided no numbers for either category. Tribune Business had been told that 75 per cent of the monthly filers met the deadline, and that there is now “near full compliance” (see other article on Page 1B).

Achieving high VAT compliance rates is vital from both the Government and private sector perspectives. For the former, it is vital to hitting its revenue objectives and restoring order to the public finances, while removing the need for further tax system tinkering.

As for the private sector, high compliance rates bolster faith that VAT is being applied equally and fairly to all. And it will also foster confidence that legitimate businesses are not losing out to the ‘black economy’.

“We’ve found ourselves in the situation we have now with fiscal deficits, and non-compliance with real property taxes and Business Licence fees, because of the lack of enforcement,” Mr Sumner told Tribune Business.

“If we want to avoid going down that road again, it is paramount for the Government to show they’re enforcing the law and raising the necessary revenues from the system. If they fail to do that, it could be a fruitless exercise...

“Compliance and enforcement must happen. Without, the system can be brought into question and compromised very quickly. We want to see the Government do as they have committed to do: Enforce this law,” Mr Sumner reiterated.

“If they can demonstrate they are enforcing the law and that compliance is up to where it should be, they are going to get the confidence of the business community very quickly.”

Mr Sumner emphasised that there should be ‘no escape’ for any business that should have registered to collect and remit VAT, yet had failed to do so.

And for existing registrants tempted to ‘game the system’, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) warned that the VAT Unit possessed all their contact details and “can reach out to them whenever they need”.

For those who deliberately did not file due VAT returns on March 2, Mr Sumner warned they could face sanctions worth up to 5 per cent of the tax liability due.

He added that the VAT Comptroller had numerous ways to levy penalties, adding them to the liability faced by non-compliant businesses or preventing them from receiving due credits and refunds.

“Why go through that and take the chance of that happening?” Mr Sumner asked. “File your returns, pay the VAT liability and let’s be compliant and not face what could be onerous fines imposed on businesses.”

“It will not be to anyone’s benefit who should have filed on March 2 not to have filed. The Government is quite serious about this, and the VAT Department is monitoring it. We want to stress to those companies that have not submitted their filings and returns to the Government that they will face penalties for not doing so.”

As for VAT registration, Mr Sumner said that despite ongoing concerns “the majority of the private sector businesses expected to register have done so”.

“We might have a few deciding to test the system, and don’t want to see anyone pay for ignorance or wilful neglect to follow through on what they were supposed to do under the law,” he told Tribune Business.

Mr Sumner praised the Government for ensuring VAT was implemented “without major resistance”, and for adopting a revised structure that was to everyone’s benefit.