The Tribune

Bahamian businesses have suffered the largest worldwide increase in the time they are forced to spend on tax compliance as a result of Value-Added Tax’s (VAT) implementation, a World Bank report has found.

Its ‘Paying Taxes 2017’ report, compiled by the PricewaterhouseCoopers (PwC) accounting firm, rated the Bahamas as a ‘world beater’ or world leader when it came to the extra time its companies now have to devote to tax calculation, administration and payment.

And VAT was also responsible for the Bahamas being ranked as joint world leader, out of 190 nations, when it came to the greatest increase in the number of tax payments it has to make.

The ‘Paying Taxes 2017’ report gave special mention to the Bahamas on a number of occasions, pointing out that this nation and its VAT were responsible for “a slight increase in the time to comply” for the Central American and Caribbean region as a whole.

As previously revealed by Tribune Business, the Bahamas slumped from 24th to 95th in the world when it came to the ‘ease of paying taxes’, due almost entirely to VAT’s introduction - and the extra compliance and payment burden imposed on its businesses.

Yet the ‘Paying Taxes’ report reveals that the Bahamas is now a world leader, albeit only for this report, in some other unwanted indicators.

“The time to comply increased most in the Bahamas - by 175 hours to 233 hours it said. “A VAT system was introduced, which requires monthly filing for our case study company.

“Even though the tax was introduced with electronic systems, as it is new, there is inevitably a transition period while businesses understand and get used to the new system.

“Additionally, in the Bahamas there was an increase in the time required to comply with social security contributions. The contributions are now paid and filed monthly, but more time is spent re-entering data as the online form does not permit information to be saved and rolled forward from month to month.”

And the Bahamas also led the world when it came to the largest year-over-year increase in tax payments, due to the monthly filings and payments imposed on the largest VAT registrants.

“The most significant increases in the number of payments sub-indicator were in the Bahamas and Croatia, which both had increases of 12,” the ‘Paying Taxes’ report said. “In the Bahamas, the change was due to the introduction of a VAT system.”

Gowon Bowe, the Chamber of Commerce’s chairman, and a former PwC (Bahamas) accountant and partner, told Tribune Business that this nation now needed to focus on improving the efficiency of VAT and its wider tax system to improve its rankings.

While VAT’s initial implementation had been relatively smooth, Mr Bowe said the Bahamas now had to concentrate on providing properly-functioning refund and appeals processes for disgruntled tax-paying registrants.

“One of the best ways to ensure a high ranking is through the efficiency of the tax system, allowing for the ease of payment, ease of refunds and ease of appeals,” Mr Bowe told Tribune Business.

“A large part of the process is on the ease of appeals and refund process, which is not yet set in the right direction.”

Mr Bowe added that the Bahamas’ ranking will also improve if all taxpayers “pay their fair share”, which would reduce administration and compliance costs for all.

On the positive side, the Bahamas was shown as still having the third lowest business tax burden in the Central American and Caribbean region at 33.8 per cent, with only Belize and Trinidad & Tobago lower at 31.1 per cent and 32.2 per cent.

And the 31 tax payments made by the average Bahamian business were also below the Central American and Caribbean average.

VAT, though, has placed the Bahamas in the region’s bottom half due to the 233 hours that businesses now spend on tax compliance, above the 210 hour average.