The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Contractors were yesterday said to be bracing for a Business Licence renewal “nightmare” in early 2025 given the industry-specific challenges associated with estimating the upcoming year’s turnover.

Leonard Sands, the Bahamian Contractors Association’s (BCA) president, told Tribune Business that changes set to impact next year’s renewal cycle will likely “slow up” both the industry and individual operators and potentially result in some business closures among small and medium-sized entities.

He explained that the challenges revolve around the new requirement for companies to estimate their 2025 Business Licence fee based on turnover generated during the 2024 calendar year. If this proves an over or under-estimate, in the case of the latter the business will have to make it up by paying the difference, or balance.

Mr Sands, though, told this newspaper that the “dynamic” nature of the construction industry makes it extremely difficult for operators to provide future turnover estimates based on the business done in the prior year. With tax-paying construction firms dependent on demand for their services, he explained that while business volumes may spike in one year they can be sharply reduced the next.

As a result, the BCA president explained that a construction company can, for example, go from a $5m annual turnover generated from multiple jobs and contracts to just $300,000 the following year from only two to three projects. 

With such swings making it extremely difficult to calculate future turnover based on past performance, Mr Sands said there was a concern that some contractors will “seemingly look like fraudsters” to the Department of Inland Revenue (DIR) if a significant gap between estimated and actual top-line revenue materialises.

While no discussions have yet taken place with the Department of Inland Revenue over these concerns, the BCA was said to be “preparing the information right now to send out” to members and the wider industry. Mr Sands recommended that contractors hire accountants to help preparation for the upcoming Business Licence renewals - a move that will create an added expense, and add to construction costs and bureaucracy.

“It’s going to be a nightmare for us, Business Licences for contractors,” Mr Sands told Tribune Business. “I think that the Business Licence changes are going to impact a large number of construction businesses mainly because I don’t think there’s been enough public education on what the changes are and how to negotiate the changes as small and medium-sized enterprises” with turnover above $250,000.

“The Chamber of Commerce’s chief executive has highlighted one of the biggest risks to business activity in 2025, which is the changes in the requirements for the Business Licence,” the BCA chief added. “On the face of it, Business Licence fee filings will be based on activity in the year before and estimated.

“If persons are not savvy enough or have an accountant, how are they going to properly estimate what their turnover will be for next year?” Mr Sands said these concerns were industry-specific as, unlike other sectors, construction does not necessarily generate a steady, consistent stream of business for the whole year but, rather, peaks and troughs in activity for many firms.

“A business that sells burgers, chicken and fries, there’s consistency of sales when persons book their orders at the window,” he added. “But, in construction, a person’s going to have to win contracts and bids, and wins are based on the level of competition and market activity.

“In one year a contractor could do $2m, and then $500,000 the other year. That’s how dynamic it is. It’s not controlled by something as rigid as someone coming to the window and placing an order for burgers and fries. To ask contractors to estimate an amount at the start of the year is incredibly difficult. There needs to be more discussion about it.”

Mr Sands voiced concerns that major variances between actual and estimated turnover could expose some Bahamian contractor to “seemingly looking like fraudulent persons in the eyes of the Department of Inland Revenue. We don’t want that. There’s already a suspicion, a lack of trust in industry. Coupled with that, it could be problematic. We need to have a discussion on that”.

The BCA chief, though, said some contractors are likely unaware of these challenges. “I think it’s a reasonable concern but I don’t think persons are fully aware of how concerning it should be,” he added. “For those aware, it’s concerning. For those unaware, ignorance is bliss.”

Urging the industry to hire accountants to deal with Business Licence filings and calculations, he added: “That adds cost to every construction company and adds cost to every project. It means construction project costs could go up because every project will be impacted by the cost of the accountant.”

Pointing out that contractors will have to back up their turnover filings with documentary evidence, Mr Sands told Tribune Business of the likely consequences: “I think it’s going to slow up the way construction companies are able to quickly prepare to get their Business Licence documents and operate in the sector.

“The impact is that it may slow some companies down. I expect it to reduce the number of companies in the marketplace who may not be able to pivot and manoevere, and it could have a significant impact on small construction companies. I think it’s going to be easier to engage an accountant rather than take it on yourself.”

Only companies with annual turnover exceeding $5m have to submit full audited financial statements for Business Licence purposes, but their smaller counterparts do not escape scrutiny either. Those generating more than $250,000 per annum in top-line revenue need their financials certified by an independent accountant to verify that their filings and payments are accurate.

Companies required by law and regulation to produce their audited financial statements at end-April every year, such as the Central Bank’s bank and trust company licensees, will be given until that deadline to do likewise for Business Licence purposes.

And businesses that are pushed above the $5m annual turnover threshold for the first time, thereby triggering the Business Licence audit requirement, through enjoying a top-line revenue increase in 2024 will also not be held to the March 31 deadline given that they may be undergoing such rigorous procedures for the first time.

Business Licence fees are one area targeted for increased revenues by the Government. They are projected to increase by more than $62.5m, or 44.4 percent, to $203.554m during the current 2024-2025 fiscal year compared to the prior one, before rising again to $237.828m and $240.182m in 2025-2026 and 2026-2027, respectively.

Meanwhile, some 81.7 percent of the 2023-2024 fiscal year’s target was collected by end-March this year. Data unveiled with the 2024-2025 Budget showed that some $115.307m in Business Licence fee revenues had been collected at that point compared to the full-year target of $141m.