The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent QC is arguing that Bahamian companies will be breaking the law if they comply with the government’s request to file “estimated” VAT returns for March today.

Wayne Munroe QC, pictured, told Tribune Business he could find nothing in the VAT Act that permits registrants to file anything other than accurate returns and payments to the Department of Inland Revenue.

Pointing out that companies subject to the nationwide lockdown would also be violating the government’s Emergency Powers Orders if they went to their offices to complete the necessary paperwork, Mr Munroe said he could not advise clients to break the law over the monthly and quarterly VAT returns due today.

Arguing that “we’re all making a sacrifice”, Mr Munroe said that if his firm and others were unable to earn revenues due to the lockdown then it was “only fair” that the government not earn income as well.

“They’re now calling for VAT returns and payments on April 21 [today],” the attorney explained, “but the law in place prevents anyone but essential services from complying with it because you can’t do it from your office. My office manager is diabetic, and they have have her so scared that she won’t go into the office. And I won’t make her.”

Mr Munroe said the VAT Act’s stipulations directly contradicted both the government’s Emergency Powers and related Orders, and the Department of Inland Revenue’s call for estimated filings, as it mandated that registrants “must make accurate payments”.

“They’re in a state,” he added of the government. “I don’t know how the government can tell you to break the law. I intend to obey the Competent Authority [the prime minister]. He tells me my person can’t go in, she won’t go in, and I don’t see any ability in the VAT Act to estimate anything.”

Mr Munroe, saying he will not advise any of his clients to “break the law”, added: “It’s only fair. We can’t get revenue so why should they [the Government] be able to make revenue. We’re all making a sacrifice. There’s something peculiar about it.”

The Government, with revenues down an estimated 70 percent due to the COVID-19 lockdown and tourism shutdown, is eager to lay its hands on every cent of VAT income it can get from businesses still operating given the multi-million dollar obligations that it must meet every month.

With many companies closed due to the lockdown, the Department of Inland Revenue has said it will permit VAT registrants to “estimate” their turnover for the due monthly and quarterly filings - the issue that Mr Munroe is challenging.

“Although some businesses do not have access to all their latest records at home, due to the COVID-19 related closures, they are able to file VAT returns based on an estimate of turnover for the period and submit amendments later,” the Department of Inland Revenue said in a statement last week.

“While there will be no penalty for businesses who submit amendments for filings during the emergency order, the penalties associated with late filings are still in place.”

The Government is pressing ahead with VAT collections despite calls from the Chamber of Commerce to defer quarterly returns/payments from micro, small and medium-sized enterprises (MSMEs) as means to give them extra cash flow to keep staff employed and ride out the COVID-19 pandemic.

The Chamber, in a statement, said: “The Novel Coronavirus (COVID-19) is a health and economic crisis of epic proportions. Businesses are faced with the difficult decision of having to reduce staff and manage operational costs, while the Government of The Bahamas continues to work on keeping its citizens and residents safe in the face of the spread of COVID-19.

“At the time of the initial VAT deferral [in March] no one knew how long businesses would not be allowed to operate. In the interim, businesses have continued to pay employee salaries, company utilities and rent. They also had to pay vendors for goods shipped prior to the shutdown, customs to clear shipments from the docks, additional security services to protect closed premises, along with other expenses.

“Given the fiscal state of many of these MSMEs, it is the Chamber’s strong recommendation that the Government of The Bahamas defer the payment of VAT quarterly filings. This will assist the business community with its cash flow during these challenging times and, in some cases, will prevent their permanent closure.”

The major contributors to this month’s VAT filings are likely to be food stores, pharmacies, gas stations, communications firms and others exempt from the lockdown. However, many companies are likely to seek a “credit” from the Government as their VAT ‘input’ payments will be greater than those on their ‘outputs’ due to their closure and absence of any revenue streams.