The Tribune

Major tax defaulters were yesterday warned to brace for “shock treatment” from the Government’s recently-unveiled tax crackdown, the Bahamas Chamber of Commerce’s (BCCEC) chairman giving his “strong support” to the initiative.

Gowon Bowe told Tribune Business that provided the Department of Inland Revenue took a “balanced and comprehensive approach” to its enforcement offensive, it would move “the pendulum in the right direction” of a tax compliance culture.

“It’s certainly going to be something of a shock treatment,” he said. “I think persons have taken a lax approach in terms of enforcement and discipline for granted.

“What is going to come as a shock, if they are balanced and comprehensive in their enforcement, is that this can move the pendulum in the right direction by holding all taxpayers to account for monies they should be remitting.”

Mr Bowe’s and the Chamber’s strong endorsement will provide a major boost for the Ministry of Finance’s tax crackdown, which will be enforced by a 32-person unit formed from Department of Inland Revenue and Customs personnel.

They will target 600 businesses, and 5,000 property owners, in the first phase of an enforcement/compliance offensive that is designed to yield an extra $40-$80 million for the Public Treasury within six to 12 months.

The targeted businesses, said to represent 5 per cent of all licensed companies in the Bahamas, are those identified by the Ministry of Finance/Inland Revenue as having “the largest apparent discrepancies” between their Business License payments, Value-Added Tax (VAT) filings and Customs reports.

The Government will also send “courier” demands for extra real property tax payments to 5,000 homeowners in wealthy and upper middle class communities, who it believes are “under-paying” their due liabilities for a variety of reasons.

The Ministry of Finance argued that its compliance offensive would improve fairness and equity in the Bahamian taxation system by ensuring that all taxpayers “pay their fair share”.

It emphasised, in particular, that its efforts were designed to create “a level playing field” for all Bahamas-based businesses, ensuring that those evading due taxes did not obtain an undue competitive advantage and further burden their tax-compliant rivals.

Backing these goals, Mr Bowe said the Ministry of Finance and Department of Inland Revenue had given the Chamber forewarning of their intentions and allowed it to provide feedback.

Noting that the Chamber planned to issue a communication to its members on the enforcement drive, Mr Bowe called for both sides - the Government and taxpayers - to adopt “an open mind” approach.

“Are these legitimate differences?” he asked in relation to VAT/Business Licence fee discrepancies, “and if not, how are you going to deal with the rule breakers?

“There might be slight differences between what is included in the VAT and Business Licence filings, but those factors should be easily identifiable and, once they’ve acted in a balanced manner, payers who are delinquent should be held to account.

“This is one of the mechanisms we strongly support to level the playing field.”

Mr Bowe said tax-compliant Bahamian businesses were frequently having to shoulder an even greater burden on behalf of counterparts who failed to meet their obligations to the Public Treasury.

He added that ensuring all taxpayers met their obligation would create a broader tax base, helping to ensure rates remained low and minimising the system’s complexity.

Mr Bowe told Tribune Business that the Department of Inland Revenue’s strategy was to achieve “the biggest bang for the buck”, or greatest return per enforcement dollar, by concentrating on the largest, wealthiest taxpayers shown as having the greatest “discrepancies”.

This, he explained, would likely result in commercial properties, and residential properties in high-end and upper middle class communities, being targeted by the real property tax element of the Government’s initiative.

That is targeting taxpayers who may be “under-paying” due to outdated property valuations, the properties being misclassified, or they are not registered in the property tax database.

“We expect the Government to focus on the biggest bang for the buck, but also to ensure that it is not a discriminatory exercise as they work their way through the system,” Mr Bowe told Tribune Business.

He added that enforcement actions taken against high-profile targets would “lead to better behaviour to avoid being sanctioned, fined or penalised” by other taxpayers.

Mr Bowe also urged the Government to avoid “a dictatorship type initiative”, adding: “As long as there’s a fair and equitable appeals process, and as long as we get the right answer, not an autocratic one, we’ll be on the path to success.”

The Ministry of Finance and Department of Inland Revenue are focusing on four key taxes: Business Licences, VAT, real property tax and Customs duties.

New Customs procedures are being created, and new container examination procedures implemented.

“Those that reveal material discrepancies between actual content and what is declared will result in the importer of the goods paying the proper Customs duty, as well as a fine for under-reporting, where the misreporting was substantial,” the Ministry of Finance said.

“Finally, another work stream will involve the completion of VAT and Customs post-clearance audits. This activity involves conducting audits of businesses that analysis suggest may be inaccurately reporting on their VAT, Business License and/or Customs Duty filings.”