The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce's chairman yesterday called for "a real hard look" at a Business Licence fee formula many in the private sector blame for plunging their businesses into loss.

Michael Maura told Tribune Business this was one of many issues the Government must address during its upcoming Budget process, along with the completion of projects to boost efficiency within the public sector and cross-border trade.

"We would expect, and hope, there's a real had look at the Business Licence fee formula," he said of the 2018-2019 Budget, which will be unveiled in Parliament today. "It has been dependent on gross turnover, which has resulted in many businesses in various years paying taxes that have caused them to lose money.

"We would hope the Government will consider a gross profit formula that takes into consideration the cost that businesses have incurred."

The Government has already hired the UK arm of the Deloitte & Touche accounting firm to review the Business Licence fee structure as part of a wider study of the Bahamian tax system, which will also focus on the implications of impending World Trade Organisation (WTO) membership and the pressures on the financial services industry.

K P Turnquest, Deputy Prime Minister, told Tribune Business in a recent interview that the Government is aware of the Business Licence fee's "unfairness" - especially where high turnover, low margin businesses such as food stores and gas stations were concerned.

Emphasising that the Government remains committed to addressing this, Mr Turnquest also acknowledged the need for certainty and predictability with a Bahamian tax system that is frequently tinkered with in the annual Budget.

"We're very cognisant, if you will, of the unfairness of the tax," he said of the Business Licence. "This is one of the reasons we are having the study done to see how we can make the tax more progressive.

"It is an important consideration for us. This was one of the things we promised in our campaign; to look at the fairness of the Business Licence fee, particularly as it relates to high turnover, low margin businesses.

"We believe, fundamentally, that no tax should be so burdensome that it creates a negative cash flow and puts businesses into a loss. Whatever changes we make have to be incremental and be well thought-out."

Mr Turnquest declined to comment further, saying he did not want to "prejudge" Deloitte UK's findings. He added that the accounting firm's study would identify the various tax reform options available to the Bahamas, given the challenges and pressures it is facing, and the implications associated with implementing each one.

The Business Licence fee's calculation on gross turnover is viewed as penalising high turnover, low margin businesses while favouring low turnover businesses that are more profitable. Tribune Business has received complaints from numerous companies that they pay more in annual Business Licence fees than they do in profits, and/or that the fees push them into losses.

Mr Turnquest, meanwhile, agreed that business and investor confidence will be boosted by a return to certainty and predictability with the Bahamas' taxation system.

"We have come through a period of change with VAT's introduction," he told Tribune Business. "We have to constantly bear in mind and plan for WTO and what that may mean.

"We want any changes to be detailed and for the long-term. We certainly don't want to be tinkering with the tax system on an annual basis. We have to have certainty."

Mr Maura, meanwhile, yesterday called for the Government to ensure there was sufficient funding in the 2018-2019 Budget to bring projects designed to improve Customs and public sector efficiency to fruition.

"We would be looking, and hoping, that the Government will continue to push for and work towards a more efficient, leaner government," he told Tribune Business. Critical to this, Mr Maura added, was progress on a host of Inter-American Development Bank (IDB) funded projects, including reform of the public sector's financial management and reporting process.

That is intended to improve the Government's budgeting, accounting and procurement processes, and the Chamber chairman added that moves to e-government were also essential to enhance public sector "efficiency and competitiveness".

With the current tax-paying process "very time consuming, expensive and inefficient" for government and taxpayers alike, Mr Maura said: "We would be hoping to realise cross-agency connectivity to end the need to engage the government on so many fronts."

He also urged the Government to complete the Customs' Electronic Single Window (ESW) project, which promises to boost efficiency - and reduce time and costs - associated with the movement of goods in and out of the Bahamas.

"It will be transformative in terms of the trading experience and clearing of cargo," the Chamber chairman told Tribune Business. "It's a 24/7 system. Whereas today a significant component of Bahamas Customs is electronic, the decision-making part of the system is a manual process.

"This means the Customs entries only get processed in a working week. In the future, this Electronic Single Window is an intuitive system, smart system built into it. People will be able to clear their cargo at midnight and pay for it.

"It will just take a few minutes. That's the type of thing we have to make sure the Budget identifies as priorities, and they dedicate or direct monies to ensure these projects are completed."

Mr Maura also called for a focus on the Small Business Development Centre that the Government has partnered with the University of the Bahamas (UoB) and Chamber of Commerce on.