The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A small business advocate says the blame for Business Licence delays falls largely on the sector and not a government which is seeking to “squeeze every dime” out of entrepreneurs by the March 31 deadline.

Mark A Turnquest, president of the fledgling 242 Small Business Association and Resource Centre, as well as a consultant to many companies, told Tribune Business that the failure of many small and medium-sized (SME) firms to keep proper accounting records was contributing to the issues the were experiencing with Business Licence renewals.

Speaking after Michael Halkitis, minister of economic affairs, last week said 47 percent of Business Licence applicants were reporting zero turnover or exactly the same top-line as in the past three years, he argued that small businesses must take responsibility for the accuracy of what they are reporting to the Department of Inland Revenue.

“People are doing stupid accounting,” Mr Turnquest told this newspaper. “We have a serious problem with small businesses keeping financial records. If small businesses are keeping poor financial records, ain’t no way in the world they are going to grow. If you don’t keep financial records, and just make up the numbers, the problem is that this can be verified. If you are bringing in product from the US, the Government can check against Customs duty payments.

“We are seeing small businesses out there struggling. After COVID-19, everybody was shell shocked. It’s obvious there are enormous challenges with small businesses having problems giving the correct information. It looks like only 10 percent so far have satisfied and been given their Business Licences to-date.

“It’s a problem now because the Government is looking for more taxes and they want more accountability. It looks like the Government is going to draw this out to March 31 and force businesses to come forward with accurate numbers. Right now, if you’re ordering product in the US, they’re going to track you based on Customs duty. You can’t do stealth accounting in the backroom any more. You have to come straight.”

Mr Halkitis last week said the Department of Inland Revenue was not requiring small businesses with an annual turnover of less than $100,000 - and which have to pay zero Business Licence fees - to provide income statements as proof of turnover. This newspaper had been informed that the agency is asking, post-submission, for figures such as revenue and gross profit in its checking.

However, he added that the tax authorities simply “cannot look the other way” when 47 percent of Business Licence applicants are submitting no turnover or “exactly the same amount for the last three years”. The Department of Inland Revenue, the minister said, must not ignore discrepancies and inconsistencies, or take turnover figure supplied by companies “at face value” if they “do not make sense”, given the need to collect all monies due to the Public Treasury.

While conceding that turnover verification checks do cause delay in Business Licence renewals, he added that the revenue agencies believe they “can strike the balance” between regulation, ease of doing business and collecting the proper amount of fees.

Mr Turnquest, noting that VAT’s introduction in 2015 had imposed discipline on companies with annual turnovers above the $100,000 registration threshold, said that “a year’s worth of work” would be required to bring some SMEs’ accounting records and procedures up to standard.

He added that one reason for poor record-keeping was that many persons had been forced to become entrepreneurs when they were terminated or furloughed during the COVID-19 pandemic, yet they had no sense of what it took to run an enterprise.

“The ones who started a business within the last five years, none of them keep good financial records, and that’s a problem,” Mr Turnquest said. “A lot of people went into business because they were laid off. They were forced into business, didn’t understand business and didn’t have a business plan.

“Out of desperation they started a business from their own place, selling from home. We’re trying to regularise them and provide some structure for them. We just had our first Board meeting of the year as an association, and we realise training is the number one priority for small businesses because of the enormous challenge with Business Licences being renewed.

“The Government is going to squeeze everybody up to March 31 to spill their guts, provide more information. The Government needs more tax income, so they are going to get every dime out of people. It ain’t the Government to blame; it’s the small businesses to blame,” Mr Turnquest continued.

“You cannot run a successful small business if you are trying to do illegal and informal stuff. If you are in business, you have to behave as if you are in business. I am trying to bring some accountability so that, in the long-run, small businesses will be more respected. We have to get businesses, and small businesses, together.”

Mr Turnquest said his Association plans to stage an April 2023 workshop “catering to all small businesses” in a bid to provide training on financial statements and record-keeping; marketing strategies; operations and management; and relevant legislation and policies that affect each enterprise.

“I think we have had in excess of 33,000 business that gave applied, of which 3,000 so far have been successfully dealt with,” Mr Halkitis said last week. He added that around 24 extra staff have been drafted in, or seconded, to the Department of Inland Revenue during 2023’s early months to assist with Business Licence renewal processing.

“What we found, out of all the applications, just under half, 47 percent, have reported zero turnover or turnover that was exactly the same for the last three years,” the minister continued. “What the Department has determined is that they will request additional information to verify” turnover is deemed necessary.

“They’re being required to provide some additional information so the Department of Inland Revenue is in a position to verify turnover,” Mr Halkitis said of businesses. “What we are undertaking is that all Business Licence renewals that apply will be dealt with by March 31 so that no one will be in danger of not having their application completed...

“What Inland Revenue has to do is verify that what businesses are reporting, as best as they can, is accurate. The law empowers Inland Revenue to request additional information. So, for example, if they see a return that just does not make sense, it’s too low, but you might have a business who, you know that they did not make $20,000 last year, all right, and you have ways to check this by Customs imports etc, utility bills and all sorts of things.”

“In this particular case, that is under-reporting, and so it is incumbent upon them to do some checks because if we look at the big picture all of us are taxpayers, and all of us are required to pay our share, and so the Department of Inland Revenue cannot just look the other way when someone is providing the number and just take the number at face value.”