The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Superwash’s president yesterday said its Value-Added Tax (VAT) payment for February was down 35 per cent month-over-month, as the burden shifts to utilities and others who billed for January a month later.

Dionisio D’Aguilar told Tribune Business that the Government would have received a relative VAT “windfall” from some of its 550 monthly filers in January, given that they had few ‘input’ payments to net off against the taxes they collected.

This, he explained, would cease from February onwards, as companies were able to net off the VAT collected from consumers against that paid on Bahamas Electricity Corporation (BEC) and other utility bills, for instance.

But, given that BEC billed the majority of its customers for January services a month later, the Corporation’s VAT contribution for February will likely increase significantly. Thus the Government is unlikely to see any appreciable reduction in its total VAT collection.

What Mr D’Aguilar has likely seen is effectively a ‘rebalancing’, or shifting, of the VAT burden between registrant companies due to a “timing issue”, something that will not be repeated with individual firms’ payments now set to adopt a smoother, more normalised trend, fluctuations in business activity excepted.

“As I predicted, our second VAT filing will be significantly lower than the first one,” the Superwash president told Tribune Business.

“All we did in January was receive monies from customers. The Government got a windfall. It was an anomaly for the monthly filers.

“We paid all our January bills in February, so now the Government should get a hell of a lot less from us... We’re paying 35 per cent less this month [for February] than last month.”

Mr D’Aguilar also acknowledged Superwash’s reduced VAT payment was also a product of February being two to three days shorter than all other months.

He reiterated, though, calls for the Government to enforce “ruthless compliance” with VAT from the start, warning that unless it failed to set “the tone” now, its tax reform centrepiece would suffer the same fate as all existing levies.

And Mr D’Aguilar warned that the absence of “checks and balances” on public spending, and the ongoing public “shenanigans” in the Government, threatened to turn many in the private sector into reluctant VAT payers.

He also expressed concern over whether the Ministry of Finance’s VAT Department had the necessary system an technical expertise and systems to properly administer the tax, adding that Bahamian culture was not steeped in tax compliance.

“What have they done to give us a comfort level that people are not in arrears on VAT?” Mr D’Aguilar asked. “It’s a little early, but there has to be ruthless compliance because if they don’t set the tone now, they will be in the same position with this tax as they are with the other taxes.”

The Superwash president, and former Chamber of Commerce chief, said the private sector would be better “motivated to comply” with VAT if they had comfort that the Government was using the extra revenues generated properly.

Instead, early indications are that there will be little transparency with how the VAT revenues are used, given that they are being paid into the Consolidated Fund.

Referring specifically to the BAMSI debacle, in which a contractor failed to take out insurance for a fire-destroyed dormitory, Mr D’Aguilar said: “We have all these shenanigans going on in government, and the desire to comply diminishes.

“You comply but comply reluctantly, and don’t get 100 per cent compliance if people comply reluctantly. What’s in the press now does not give people confidence their money will be put to good use and spent wisely.”

He called for “checks and balances to ensure good governance”, so that the increased revenue windfall from VAT - projected to be $300-$350 million in a full year - was subject to good stewardship and governed properly.

And Mr D’Aguilar warned that “the proof” of VAT compliance “will be in how the quarterly filers and semi-annual filers” meet the law’s requirements.

He added that it was easier for the Government to enforce VAT compliance among the monthly registrants, with annual turnovers exceeding $5 million, because these numbered just several hundred and were all well-known.

“It’s easy to audit several hundred companies,” Mr D’Aguilar told Tribune Business, explaining that the VAT Department could use monthly filers’ past Business Licence filings as a cross-check to determine whether they were reporting accurate sales (and tax payments).