The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance’s top official yesterday challenged why Business Licence audits for firms with turnover over $5m is “posing a great difficulty” given that less than 1 percent of all companies are impacted.

Simon Wilson, the financial secretary, told Tribune Business that both the private sector and accounting profession had been given more than ample notice of the enhanced Business Licence verification reforms since discussions with both occurred prior to the 2023-2024 Budget’s unveiling in May.

And, using the Bahamas Institute of Chartered Accountants (BICA) estimates for how many companies will be affected by the requirement to produce audited financial statements, he added that this amounted to “0.003 percent” of the 45,000 annual Business Licence applicants.

Mr Wilson also told this newspaper that if the enhanced turnover reporting produces “a 5 percent increase in revenue yield” from the Business Licence then the Government will have made its case and justified the reforms.

Speaking amid ongoing calls by both BICA and the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) to give $5m-plus turnover firms an extra 12 months to “get their house in order” before being subjected to a full audit, he said: “I think we made it quite clear that they had over one year’s notice.

“When we first broached this topic with them, it was March or April, and then we came back before final approval in May. We told them the Government had made the decision to move forward in this direction. The legislation [the Business Licence Act 2023] was tabled in May. We worked with BICA for three months on the guidance notes. There was ample notice.

“When we asked them to say what percentage of businesses could be impacted, based on their own numbers, it was 113 - somewhere around there. We have 45,000 businesses that apply for a Business Licence. That is less than 0.003 percent. We don’t see why this is posing a great difficulty.”

All companies need accurate financial numbers so they can properly assess their performance and determine whether structural or operational changes are needed, so verifying these via an external auditor is seen as good business practice. It is also part of sound governance, and many firms have to produce audited financials for their industry regulators and lenders/creditors.

“Most businesses at some time in their lives require some type of bank financing and have to prepare financial information approved by an external auditor,” Mr Wilson added. “Some banks for risk management purposes, if you are a heavily cash business, will say: ‘Let’s see your financial statements. We need to understand the volume of trade and activity’, and it has to be certified.

“The one thing we said is that the Government and BICA have a common interest in seeing an increased level of financial transparency in the business community, and we should be working towards a common goal. BICA should be on the Government’s side with this initiative. To say BICA can’t handle an additional 50-60 audits, I don’t see why it’s an issue.

“We’re moving ahead. We’ve made that clear. I think the benefit of moving ahead outweighs the costs of implementation by far. If we see a 5 percent increase in revenue yield because of this initiative that makes the argument very, very strong that we should move ahead.”

The Chamber, justifying its call for a 12-month delay to an audit timeline it branded “too aggressive”, said that “many Bahamian companies have not traditionally maintained this detailed level of financial records” the process requires.

“To force some businesses into an audit at this time could lead to a failed audit,” the Chamber added, reiterating that it was now renewing a call that it first made to the Government in the 2023-2024 Budget run-up to hold-off. It also pointed to the “significant expense” involved, with audits costing $20,000 and upwards and this likely to be passed on to consumers when living costs are already high.

“Many questions remain which must be properly discussed and addressed prior to full implementation,” the Chamber added. Micro, small and medium-sized enterprises (MSMEs) with annual turnovers below $250,000 will be exempt from having to maintain electronic records and have an independent accountant certify their turnover for Business Licence renewals.

This threshold was raised from $100,000 to ease the burden on more such firms, who will submit management accounts as verification of their turnover sums.

However:

• Businesses with annual revenue between $250,000 and $499,000 will require accounting certification by an independent accountant

• Businesses with turnover between $500,000 and $2.499m will require a compilation report by an independent accountant

• Businesses with revenue between $2.5m and $4.999m will require a review statement by an independent accountant

• And large taxpayers, namely businesses with turnover above $5m, will require audited financial statements produced by an independent accountant

Business Licence filings are due by end-January 2024, with payment of the correct fee required by end-March.