The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to “go further” on its Business Licence reforms and drop the maximum rate to 1 per cent, a move that would boost private sector profits and economic growth.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that cutting the maximum Business Licence fee rate from 1.75 per cent to 1.5 per cent was “a step in the right direction”.

Yet given that some 6,000 Bahamian companies were collecting the Government’s Value-Added Tax (VAT) revenues for it, Mr Sumner said a deeper cut to 1 per cent would “be a good trade-off”.

He also made a renewed call for the Government to team with the BCCEC in a public-private partnership (PPP) that would see the latter manage/operate the Business Licence registry on its behalf.

Apart from again assisting the Government with collecting its taxes, Mr Sumner said the Chamber would boost the Registry’s “efficiency and compliance, and ensure fewer companies were operating in the informal or ‘black’ economy.

The BCCEC chief suggested that such a PPP would thus improve private sector “integrity” and the ‘ease of doing business’ in the Bahamas - an area where this nation has slipped in the world rankings over successive years.

Prime Minister Perry Christie used his 2015-2016 Budget to announce the Government will cut the top Business Licence fee rate by 25 basis points in the upcoming fiscal year, part of what he termed as “returning the dividends from successful VAT implementation”.

Mr Sumner yesterday responded: “It’s a help. It’s a step in the right direction, but we would like to see it reduced even further, down to 1 per cent, particularly since private sector businesses are collecting VAT revenues for the Government.

“That would be a good trade-off, but perhaps it should go even further to give businesses an opportunity to keep more of their profits and make a contribution to the economic development of this country.”

Business Licence fees are based on top-line turnover and, as such, have consistently been perceived as penalising high sales/low margin businesses such as food stores, gas stations and auto dealers.

Many of these companies have complained that they pay more in Business Licence fees than they generate in annual profits, and capping the maximum rate at 1 per cent would in theory return more of their revenues to the bottom line. This would positively impact businesses currently facing rates of either 1.25 per cent or 1.75 per cent.

Dionisio D’Aguilar, chairman of BISX-listed AML Foods, which generates around $150 million in sales annually, told Tribune Business that the cut in the top Business Licence rate would be “an enormous help”.

“In my capacity as chairman of AML Foods, it’s going to be a significant savings, especially for those companies that have very large turnovers and extremely low margins,” he added. “Business Licence is an extremely regressive tax for us.”

Mr Sumner, meanwhile, said the Chamber had been recommending for three years that it took over operation and management of the Business Licence Registry on the Government’s behalf.

“We think we can assist by improving efficiencies, and compliance and enforcement,” he told Tribune Business, “and ensure fewer companies are attracted to operate in the informal economy.”

Mr Sumner said a Chamber-operated Business Licence Registry would help companies “remain compliant and in good standing as long as they are operating”, and ensure they are “doing the right thing to benefit” the private sector and wider Bahamas.

“We think that through a PPP we will be able to cause businesses to be compliant and operate with the utmost integrity,” Mr Sumner said.

“This is an ease of doing business issue. We understand what it takes to run a business, and also understand what is needed to regulate a business.

“If we have the private sector operating the register, I think we can assist greatly in improving the ease of doing business in the Bahamas, if it [the Registry] is run in partnership with the private sector.”

Other planned Business Licence amendments include making it mandatory for companies with annual turnovers exceeding $100,000 to have their financials certified by an accountant.

The Act will also be changed to make “clear which tax period is being covered during filing”, with late payment set to suffer a fine equal to 10 per cent of the outstanding tax liability.