The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fears were mounting yesterday that the Government’s Business Licence reforms may create “a perfect storm” for the private sector, amid further calls for the filing deadline and $100,000 certification threshold to be changed.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, acknowledged that the January 31 deadline for the filing of Business Licence renewal applications was “very tight” for all concerned.

With the 2015-2016 Budget amendments requiring that Business Licence fees be based on the calendar year, and not a company’s financial year, Mr Bowe said even firms with a December 31 year-end would be unlikely to have their accounting records in order much before the filing deadline.

This will increase the pressure on Bahamian accountants, who have to certify that the turnover figures submitted by businesses with annual revenue greater than $100,000 are accurate.

The Chamber’s 2015 annual report has again called for the certification threshold to be raised from $100,000 to $400,000, but Mr Bowe said yesterday that the Government has yet to act on previous promises to review the issue.

He called for the certification threshold to be viewed from the perspective of a “risk/reward analysis”, given the relatively minimal Business Licence fees that will be collected from companies with turnover between $100,000-$400,000 in any event.

Mr Bowe, who is also the Bahamas Institute of Chartered Accountants (BICA) vice-president, said the ‘certification’ fees charged to Bahamian small businesses would likely exceed what they paid to the Government in Business Licence fees.

He added that ‘certification’ fees would likely increase as a result of the regulations accompanying the BICA Act, set to come into force imminently, and suggested the relatively small number of available accountants made it “practically impossible” to sign-off on all companies’ figures by January 31.

“There’s one concern with the timeline of having the certification done by January 31, which is extremely tight,” Mr Bowe told Tribune Business.

“I certainly believe the Government needs to be mindful of the timeline, because when you certify you don’t want a rushed exercise. That increases the chances for error.”

“There’s a view of how can the Government demand such a tight timeline when none of the Government’s agencies have their financials done in six months.”

Mr Bowe said the certification requirement demanded that BICA-licensed accountants perform investigations and analysis, in accordance with international auditing standards, to verify that the turnover figures submitted by their private sector clients were accurate.

He pointed out that, based on the 0.75 per cent rate, a business with an annual turnover of $100,000 would pay a Business Licence fee of just $750.

Yet the fee charged by accountants to “review and certify the Business Licence is in excess of that” - possibly even double this amount if the company’s accounting records are not in order.

And Mr Bowe said “nothing has moved”, from the Government’s perspective, on previous promises by Michael Halkitis, minister of state for finance, that it was prepared to review the $100,000 certification threshold if the business community made a compelling case.

“The BCCEC has publicly stated that this threshold is too low, and will create a further burden on small businesses, when factoring in the costs of paying to have financial information certified by an independent practitioner,” the Chamber’s annual report said.

“Previous legislation had this threshold at $500,000, and later at $1 million. The BCCEC’s position is that the threshold should be increased significantly and, at a minimum, a threshold of $400,000 in total revenue be established as the trigger for an independent practitioner’s certification of financial information included in the Business Licence application process, which coincides with the threshold for VAT registrants that must file at least quarterly.”

Mr Bowe said VAT quarterly filers would need to keep “their accounting records more in order in a timely manner”, thereby facilitating easier compliance with Business Licence filing.

And he questioned why the Government wanted to impose “significant costs” on Bahamian small businesses through the verification requirement, when Value-Added Tax (VAT) returns and audits were already giving it accurate information on their financials.

“This is something that has to be considered in light of a risk/reward analysis,” Mr Bowe said. “The small business paying tax, how far off can they be?”

He also questioned whether there was sufficient accounting manpower to certify all businesses wiuth $100,000-plus turnovers within the four weeks allowed to get accounting records in order.

Mr Bowe said there were some 300 licensed BICA members available to certify around 6,000 companies, with the latter figure a ‘back of the envelope’ calculation based on VAT estimates.

Using the two figures, the Chamber chief said it resulted in each accountant having to perform 20 certifications within a period of two weeks or less - something he described as “a practical impossibility”.

Mr Bowe was backed by another senior BICA member, speaking on condition of anonymity, who told Tribune Business: “This seems to me like the perfect storm.

“There’s a lot of people below the $1 million threshold that have never done this before, and becoming familiar with what needs to be done, the requirements will be shocking to them.

“Even businesses that are very efficient can’t have their information available until mid-January. There is just not enough time for them to get it done in two weeks.”

Agreeing that there was insufficient accounting manpower to certify all companies before the January 31 returns filing deadline, the accountant said companies whose financial year-end was not December 31 would face extra work.

“I’ve had to turn away four people today who have called me” on Business Licence certification, the accountant added.

“The small businesses are going to have problems finding an accountant. They’re likely to have no accounting records, which makes it more difficult and expensive. They will call up and say: ‘We have a lot of papers. Can you do a report on them?’”

The accountant added that the Government wanted the private sector to do its work for it by entering all relevant information into the Online Tax Administration System (OTAS), yet this portal was often down - a major problem if there was a last minute filing rush.

Processing delays and fines await companies that fail to meet the January 31 deadline and supply their certifications at the same time.

Rick Lowe, Nassau Motor Company’s (NMC) director/operations manager, told Tribune Business that the Business Licence certification was “another cost of doing business”.

He added: “It’s a bit unfair to make people have an audit for $100,000. How much profit can they get on $100,000?”

Companies have to show they are in good standing with the National Insurance Board (NIB) and other taxes to receive Business Licence renewals, with some also required to provide evidence of compliance with other government agencies, such as the Department of Environmental Health Services (DEHS).

Mr Lowe said that when Nassau Motor Company sought to arrange its DEHS inspection in late 2015, the latter told it to come back in January because any visit done then would not qualify for 2016