The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is losing $500 million in taxes annually due to compliance rates that are below 50 per cent, an ex-Chamber chairman estimated yesterday, pushing the Bahamas to taxation’s “point of no return”.

Robert Myers told Tribune Business it was essential for the Government to improve compliance rates on Customs duties and real property tax to alleviate the burden on businesses that always paid their due taxes.

He warned that the Government would experience “serious push back” should it elect to introduce new or increased taxes, given that the private sector “can’t take any more”.

The Christie administration, knowing a general election is imminent, and that Value-Added Tax (VAT) has been in place for just 17 months, opted against introducing new and/or increased taxes in the 2016-2017 Budget.

It instead chose to implement enhanced compliance measures alongside the pre-election tariff rate reductions, but Mr Myers said its only option was to become “more accountable and efficient”, and crackdown on delinquent taxpayers, if the Bahamas was to extricate itself from its fiscal woes.

“This is our problem: Our compliance in Business Licence fees, Customs and real property tax is less than 45 per cent,” Mr Myers told Tribune Business. “That alone constitutes $0.5 billion in taxes [foregone].”

Referring to the Coalition for Responsible Taxation’s activities in the run-up to VAT implementation, he added: “Our message then, and today, is increasing tax compliance by 30-40 per cent would add hundreds of millions to Government revenues, and negate any necessity to increase taxes for those who are compliant.”

Prime Minister Perry Christie confirmed the accuracy of Mr Myers’ estimates during the 2016-2017 Budget presentation, revealing that real property tax compliance rates for the current fiscal year were at 42.5 per cent.

During the lead-up to VAT’s introduction, the private sector consistently expressed concern that legitimate, compliant businesses would be subjected to an ever-increasing tax burden if the Government failed to go after their delinquent counterparts.

This has yet to happen, and Mr Myers told Tribune Business: “Unfortunately for the Government, the private sector and public have reached the point of no return. We can’t take any more taxes.

“If you put more taxes into effect, you’re going to shut the economy down, not improve it. Consumers and businesses cannot afford any more taxes, and the Government’s only choice is to become more accountable and more efficient.

“In doing so, they have to crack down on those not paying their taxes, and make them pay as opposed to honest people. We’re sick and tired of having to pay their taxes,” he continued.

“The honest people are having to pay for people not paying. We’re tired of that. You have people screaming that in private and public. If they put more taxes on us, you’re going to see serious push back.”

Tribune Business revealed on Monday how businesses were starting to ‘push back’ over demands by the National Insurance Board (NIB) and other government agencies that they provide Tax Compliance Certificates (TCCs), otherwise they will not receive payments for goods and services ALREADY supplied.

The legal basis for such a requirement is contained in amendments to the Financial Administration and Audit Act, which were passed last July along with the 2015-2016 Budget.

Companies must now prove they are compliant with all their taxes prior to receiving payments on public sector contracts worth more than $10,000.

With the Public Treasury desperate for every cent of revenue it can earn, the TCC-related changes - from the Government’s perspective - represent a further tightening of the enforcement circle, and elimination of compliance gaps and loopholes.

However, the move also threatens to increase the bureaucracy and red tape facing the private sector, plus increase its compliance burden and impede cash flows.

Mr Myers, now a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that while he backed the Government’s objectives, the methods by which it was seeking to enforce greater tax compliance were questionable.

“I think some of the details are very shaky and non-business friendly,” he said. “The macroeconomic objective is very positive.

“Of course, the devil is in the detail, but from a macroeconomic viewpoint that’s an essential objective. Tax compliance is very critical.

“But the intent should not be to make it obstructive for businesses to operate. That’s not good business for anybody, including the Government. You need to strike a balance.”

Mr Myers likened the situation to the private sector’s call, which was ultimately heeded, for a simplified VAT model, on the grounds that this would aid compliance and the ability of businesses to collect the Government’s due taxes.

“The more obstructive and obtrusive you make it, the less likely you are to get compliance,” Mr Myers said of tax administration systems.

“The more difficult you make the tax, the less compliance you are going to see in receiving the tax. The simpler you make it for people to do business, the higher the level of compliance is going to be.

“The point is not to just create regulations that make doing business more difficult; they need to go after those businesses that are non-compliant and don’t have Business Licences, let alone make National Insurance Board (NIB) contributions.”