The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has made good on promises to eliminate bi-annual Value-Added Tax (VAT) return filings, amid “very vociferous” concerns expressed by small and medium-sized businesses (SMEs) about the increased administrative burden that will result.”

A Department of Inland Revenue notice, e-mailed to VAT registrants and obtained by Tribune Business, confirms that companies with annual turnovers between $100,000 and $400,000 will now have to file their returns quarterly, starting on April 1, 2016.

During VAT’s first year, these firms had been permitted to file just twice - at mid-year and for end-December - but the Government had indicated last year it was planning to abandon bi-annual filing.

Following through, the Department of Inland Revenue e-mail said: “As a part of its administrative procedures, the Department of Inland Revenue routinely reviews the filing frequency assigned to taxpayers, based on information available to the Department, including taxpayers’ filing history.

“In accordance with Section 46(2) of the VAT Act 2014, the Department has now determined that your filing frequency has been changed from bi-annually to quarterly, as bi-annual filing has been discontinued.

“This change took effect as of January 1, 2016. Thereafter you are now required to file quarterly. Your first quarterly return and payment will be due on or before April 28, 2016.”

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, yesterday confirmed that the Government’s move to eliminate bi-annual filing came as no surprise.

He added, though, that many SMEs had previously expressed great concern about the shift to quarterly (four times’ per year) VAT return filing and payment, given the time that would need to be devoted to compliance.

Mr Sumner revealed that the Chamber is currently conducting a study on VAT’s impact on the private sector, now that it has been in effect for 14 months, in a bid to determine whether improvements to ease the burden on businesses need to be made.

He added that the report would, in particular, focus on SMEs and their filing frequencies, and whether this was presenting an impediment to commerce.

“We knew that was in the works and going to be coming down the pipeline,” Mr Sumner told Tribune Business of the end to bi-annual VAT filing.

“We sent out a notice previously that it was going to be happening. We’re looking at that again. It’s on my agenda to discuss with the Government.

“We’re currently conducting a survey and preparing a report on the impact of VAT on the economy.... Part of that will be talking about the issues experienced in the implementation process leading up to VAT, and the impact on businesses post-VAT, including filing periods.”

Pointing to the misgivings harboured by many SMEs about having to file for, and pay, VAT twice as frequently, Mr Sumner added: “We heard very vociferously from some businesses that more frequent filing was not good for their businesses, particularly small and medium-sized businesses.

“We need to have a look at that entire process again to determine what’s in their best interests, particularly the decision to move from bi-annual to quarterly filing.”

Mr Sumner said “the main concern” among bi-annual filers was “the time it [quarterly filing] will take away from regular work, putting together the accounts and going online to prepare to file electronically”.

Although companies with annual turnovers between $100,000 and $400,000 were permitted to file bi-annually in 2015, both the Government and VAT Education Task Force - of which Mr Sumner was a part - had encouraged them to submit returns more frequently.

This was justified on the basis that it would allow such companies to manage cash flow, and turn over tax payments on a more consistent basis, rather than let the VAT money due to Government build up in their accounts.

The VAT Unit has long been concerned that quarterly and bi-annual filers may be tempted to use due VAT for working capital as its builds up in their accounts over several months.

The danger here is that not only may the Government be deprived of due revenue, but the businesses involved will be breaking the law and open to potential prosecution.

Mr Sumner yesterday said the Chamber’s SME members had indicated a preference for quarterly, as opposed to monthly, filing because they felt the latter frequency posed “too much of an administrative burden”.

Referring to the Chamber’s VAT study, which seeks to collect empirical data to answer such questions, he added that it would focus on “whether moving bi-annuals up to file on a quarterly basis will have any further adverse impact on the administration of business”.

“It is the case that we are now so far into VAT implementation that we need to determine whether private sector businesses, especially SMEs, are finding it a task to prepare these filings,” Mr Sumner explained to Tribune Business.

“If that’s the case, we have to address that as well. The micro businesses, filing on a bi-annual basis, moving them up to quarterly, what does that mean for them?

“We have to look, 14 months into VAT, whether the process of filing has become less onerous, and whether people are finding that the system and processes for filing is any less onerous than when we began.”

Mr Sumner said the Chamber expected to receive the results from its VAT study within the next several weeks, and would share the findings with the Government and the public once it was completed.