The Tribune

• Inland Revenue has ‘no workers in Out Islands’

• FNM: Stop playing ‘blame game’ on agency woe

• ‘Electronic devices’ for cash-based business VAT

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s main revenue agency is targeting a further two-thirds expansion of its workforce to around 500 staff, a top official revealed yesterday, adding: “We have no staff in the Family Islands.”

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business there had been “a marked improvement” in addressing the Department of Inland Revenue’s human resources shortcomings with some 100 workers hired to address deficiencies outlined by the Prime Minister in his 2022-2023 Budget presentation.

He added, though, that a further 200 employees would likely be necessary to ensure the agency - the Government’s main revenue collector at $1.4bn per annum - has sufficient staff to properly service taxpayers, efficiently collect and administer a variety of taxes, identify and crackdown on tax evaders, and conduct audits and related assessments.

“We’ve made a marked improvement since then,” Mr Wilson told this newspaper regarding the Department of Inland Revenue’s status. “We have a new annex building that we’ve occupied, we’ve brought on new staff and regularised staff. We’ve done a lot.

“But we still probably need an additional 200 staff. We’re currently around 300 something, and we could probably go to 500 some. It collects the most money of all agencies, collecting around $1.4bn in taxes. We need staff in the Family Islands. In some islands we have no staff. Unlike Customs, we have no staff in some Family Islands. We have less than 20 staff in Grand Bahama, and nobody in Andros.” No figures were provided for the cost of hiring these workers.

The Department of Inland Revenue is responsible for collecting VAT, the Government’s main revenue source, as well as other critical income sources such as real property tax payments and Business Licence fees. It has increasingly begun to replace Customs as the main revenue agency, especially as the Government seeks to focus on its major revenue sources and move away from the more inefficient import tariffs and Excise taxes.

However, while it may need to expand its workforce and better acquire the necessary skills and expertise, some observers will likely fear that a 500-strong Department of Inland Revenue will become a bloated bureaucracy with unaccountable powers akin to the US Internal Revenue Service (IRS). Such concerns were expressed privately to Tribune Business by private sector sources when the agency was conceived by the last Ingraham administration between 2007 and 2012.

The Department of Inland Revenue staffing issues, first unveiled by Philip Davis QC, were reiterated in the just-released Ministry of Finance report that sets out a road map for increasing government revenues to a sum equal to one-quarter of Bahamian economic output over the next four fiscal years.

“The department has 214 employees of which only 52 are permanent and 49 are seconded from other departments; 54 per cent of the officers are on contract, the vast majority of which have expired,” the Ministry of Finance said.

“The last person to hold the post of controller of the department retired in 2017. Since that time no one has either been appointed to the post or chosen to act in the capacity of controller. There have also been no appointments (even on an acting basis) to the posts of deputy or assistant controller.

“Since 2017, the department has also experienced a very high turnover of staff resulting in the suspension of critical functions such as audits. Bahamian taxpayers have consequently experienced delays in the processing of Business Licence applications, VAT refunds and the resolution of real property tax matters.”

Continually upgrading the Department of Inland Revenue’s administrative capability was critical to the “modernisation and improvement of the tax system”, the report added: “The Department is the [largest] revenue collection agency in the Bahamas and, even though it plays a vital role in the collection of the country’s revenue, its staffing challenges were unfortunately ignored by the previous administration.

“Since its establishment in 2014, the legislation underpinning the structure of the Department has not yet been brought forward for consideration and approval. Stabilising the structure of the Department of Inland Revenue would only be moderately complex as far as implementation is concerned.

“It would require various legislative and administrative actions, including legislation to finalise, stabilise and consolidate authorisations within the Department of Inland Revenue, as well as legislative or policy decisions to strengthen and stabilise the staffing situation. These actions would be expected to result in significant improvements in operational efficiency, predictability and public confidence. In turn, significant revenue impacts could be expected.”

Kwasi Thompson, former minister of state for finance under the Minnis administration, yesterday rejected its successor’s swipe that it had neglected the agency. “The Minnis administration did all it could in reference to addressing the needs of the Department of Inland Revenue,” he told Tribune Business.

“The Davis administration is now the Government. It’s their responsibility to ensure all the needs are met, and they ought not to play the blame game. They are the Government now. It’s their responsibility to fix it.” Mr Wilson, meanwhile, said efforts to put in place the necessary legislation to give the Department of Inland Revenue statutory authority are “ongoing; it’s taking place right now”.

He revealed that the Government was also “very close” to establishing the Large Taxpayer Unit that will focus on generating greater compliance from, and providing better service to, the 15 percent of taxpayers that account for 80 percent of the Government’s revenue. It could be operational as early as the beginning of the 2023 calendar year, which would include the last six months of the present fiscal cycle.

“That’s one of the short-term goals; to get it up and running,” Mr Wilson told Tribune Business. “Certainly by the second half of the fiscal period we will be fully up and running. It will be a unit attached to the Department of Inland Revenue. The idea is that we want to stabilise the revenue base using dedicated resources, and that’s what the Large Taxpayer Unit will allow is to do.

“We have no forecasts for revenue yields. We have to keep the revenue momentum going. The idea behind the Large Taxpayer Unit is to minimise revenue loss and leakages.” The unit’s creation will enable the Government’s tax agencies to better focus resources on their greatest income contributors, especially given that these taxpayers typically pay in full and on-time. The greatest cause of this group’s non-compliance has been the failure to receive their tax bill on time.

Mr Wilson added that the Government has also “done our work”, and is “very close”, on proposals to introduce so-called electronic fiscal devices (EFDs) that will strengthen VAT collections from largely cash-based businesses that are most susceptible to evading this tax worldwide.

“With the option of EFDs, these could be mandated for use by VAT registrants who conduct significant portions of their sales in cash, or where sales suppression is difficult to detect. Such devices are point-of-sale attachments that ensure that receipts are issued for all transactions and that sales/VAT information is securely transmitted to the Department of Inland Revenue,” the Ministry of Finance report added.

Mr Wilson said of EFDs: “In all countries in the world they have moved to have these convenient real time VAT payments. Typically they’re found more in industries that handle a lot of cash. It has wide benefits. We’re just doing the studies now.”

The report, meanwhile, added: “The Government is continuing, through data collection agreements, to exploit the use of big data techniques to detect tax evasion and avoidance. For instance, the Government already collects data on Airbnb rentals which facilitates the identification of properties collecting revenue but not paying taxes.

“To further build on this initiative, Inland Revenue has engaged an international firm to provide data on a variety of online transactions such as Airbnb and other short-term rentals, and Amazon among others. A collaborative working group is to be established between Inland Revenue and the Bahamas Investment Authority whose objective will be to close revenue leakages in the areas of real property tax, vacation rental fees etc, associated with the short-term rental market.”