The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader yesterday pledged to reform the now-mandatory Business Licence audit for high turnover firms and abolish the practice of estimating the upcoming year’s turnover if elected to office.

Michael Pintard told Tribune Business there are “numerous types of businesses”, such as construction companies, which “cannot accurately speculate” what their top-line revenue will be for the next 12 months based on prior-year income due to inconsistencies associated with work and contracts in their industry.

With Bahamian businesses set to pay Business Licence fees based on estimated 2025 turnover by Monday, March 31, he said private sector feedback suggested this and other aspects of the existing Business Licence regime are “too onerous” and imposing extra costs on already-struggling companies.

Promising that an administration led by himself would seek to alleviate this burden and improve The Bahamas’ ease of doing business, Mr Pintard told this newspaper he would also relax the requirement for companies with annual turnover exceeding to produce audited annual financial statements to verify their figures and fee payments are accurate.

Suggesting that a “review”, which firms with turnover between $250,000 to $5m must undergo, would suffice for many businesses, he challenged why a full audit is necessary given that the Business Licence fee is paid solely on top-line revenue and nothing else.

The Opposition leader, signalling that he would be prepared to scale-down the verification to focus on turnover alone, suggested the Government’s mandatory audit demand was based on the need to gather data ahead of extending corporate income tax to the wider Bahamian economy and not just the few entities that are part of corporate groups generating 750m euros or more in annual turnover.

Calling on it to come clean over potential future tax reform, Mr Pintard said it was almost impossible for some industries to accurately estimate future annual turnover because of the very nature of their industries. Accountants yesterday confirmed that companies are due to pay Business Licence fees based on estimated turnover by Monday, and will either have to pay the difference or get a credit when the review/audit finishes.

“There are numerous types of businesses where your revenue this year has zero to do with your revenue next year,” the FNM leader argued. “If you are in construction, and hopefully you have a banner year, this year you may not have that same level of success.

“You cannot accurately speculate on what your revenue is going to be. It would be difficult unless you are doing a massive project that is multi-year. There’s a lot of businesses that fall into that category and it makes such speculation problematic.”

As for the mandatory audit for $5m-plus turnover firms, Mr Pintard said that having this done was almost “automatic” for publicly traded companies listed on BISX and financial institutions - all of whom are required by law and regulation to undertake this exercise annually anyway. It is more challenging, though, for privately-owned firms that are not used to being subject to full audits on a regular basis.

And, pointing out that Business Licence fees are based on top-line turnover alone, the Opposition leader asked: “If you are trying to verify what revenue income is, what is the Government’s motivation for a full audit? The Government must have the benefit of its due taxes, but I would put forth that there are other motivations for them. It’s almost as if they are trying to make a determination of other things.

“The moment they go down this road of income tax I think they would have some sentiments that they have not yet heard from the Bahamian public, so they are not willing to, in a forthright way, say why they are making the decisions they are making.” The Government, though, in its corporate income tax ‘green paper’, made clear it was exploring various options for extending such a tax to all parts of the economy.

Mr Pintard, though, asserted that if the Government expanded corporate income tax to most, if not all companies - and eliminated the Business Licence fee in the process - it would also have to impose an income tax on high earners as recommended by the International Monetary Fund (IMF). Otherwise companies will engage in tax avoidance by paying our profits in salaries rather than dividends.

“I believe a lot of companies are going to hike salaries to persons in the firm to reduce their exposure if the Government goes down the path of corporate income tax,” Mr Pintard said, “separate and aside from companies earning 750m euros.

“I think the Government should be very transparent as to why it’s making these decisions. A lot of companies don’t fall into the category of requiring an audit; they may need a review. People need to meet deadlines, and do we have the capacity [in companies and the accounting profession] at this juncture to meet these deadlines and have everyone compliant?

“Not every company needs an audit. Our initial consultation with businesses is they think it’s an onerous requirement, it’s an additional cost to them, they’re not seeing any purpose explained by the Department of Inland Revenue to justify it. It’s leaving businesses to question what the end game is.”

Mr Pintard argued that the Government is also “engaging in a lot of overreach”, citing the move to have insurance companies invest “a substantial portion of their investment dollars in government securities as one such example.

That was later rescinded, but he argued that this is occurring because of the Government’s financial and fiscal challenges and they are “finding all sorts of ways to extract revenue from the public and companies that we believe are adversely affecting confidence in the business environment”.