By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Only businesses “with something to hide” should fear having to submit audited financial statements over their Business Licence renewal, a prominent gas station operator believes.

Vasco Bastian, the Bahamas Petroleum Retailers Association’s vice-president, told Tribune Business that the Government’s move to tighten turnover verification and prevent Business Licence fee under-reporting promises to bring the “accountability and transparency no good business person should object to”.

While some in the private sector are worried about the cost this will impose by requiring all companies with an annual turnover worth $5m or more to submit audited financials, and others view it as overkill given that Business Licence fees are calculated solely on top-line revenues and thus only this should be certified as accurate, Mr Bastian argued the exercise will improve private sector governance.

Pointing out that accurate numbers are required to make sound business decisions, he told this newspaper: “The Government is just trying to make sure people are paying what they should be paying. It’s not a bad idea to deal with this. Fundamentally, it’s more accountability and transparency. No good business person should object to that.

“The banks already require it. Some banks, for a certain value of business and certain level of business, require you to submit audited financial statements every year. Only people with something to hide should worry. Some people might see it as an invasion of privacy. I don’t see that if you don’t have anything to hide.

“Some people paying ‘X’ amount of dollars in Business Licence may be afraid because they will now be reporting the true figure to the Government, but I don’t see an issue with regard to audited financials for over $5m,” Mr Bastian reiterated. “Government has got to do what they’ve got to do to function and keep everything going. To be honest, I don’t see an issue with it.

“Any decent, responsible business owner should always produce audited financials so they know exactly how the company is performing and where they need to make the necessary adjustments going forward to ensure the company is profitable and doing exactly what it sets out to do in terms of annual projections. I don’t see a problem.”

Mr Bastian said many companies were required, as a condition of the loans and other financing they received, to submit audited financials to banks and other lenders. He added that he would merely send to the Government, for Business Licence purposes, what is already produced for the bank so there would be “no duplication of effort there”.

“Any good business person will have annual financial statements,” the Bahamas Petroleum Retailers Association’s vice-president said. “You want to make sure those numbers are reliable numbers that you need to make critical decisions for your company and to manage cash flow.”

Tribune Business had reported last week that Bahamian accountants had urged the Government to delay the Business Licence audit requirement for firms with an annual turnover of $5m or more by one year.

Pretino P. Albury, the Bahamas Institute of Chartered Accountants (BICA) president, in a statement sent to Tribune Business said the body and its members called for implementation to be pushed back to ease “the burden on businesses that are not audit-ready”.

While the Government has not agreed to a year’s deferral, this newspaper revealed that it will give companies until end-April 2024 to submit their audited financial statements. And, once they apply and it is justified, a further two-month extension will be given until end-June 2024. However, once that deadline has passed, potential sanctions and penalties may be enforced.

“While we understand the Government’s objectives in implementing the new audit requirements, we advocate for a pragmatic approach that considers the challenges faced by businesses,” Mr Albury said. “Our proposal for a one-year delay is aimed at ensuring a smoother transition without adversely affecting businesses with turnovers of $5m or more.”

Simon Wilson, the Ministry of Finance’s financial secretary, said he is hopeful that the Government, accounting industry and private sector can shortly finalise and publish an agreed framework that has “built-in flexibility” over the deadlines by when companies with annual turnover exceeding $5m must submit their audited financial statements.

While many in the accounting and private sectors view the demand for audited financial statements as too onerous and unnecessary, given that only top-line turnover needs to be verified as this is what the annual Business Licence fee is based on, Mr Wilson explained that the Ministry of Finance has a broader objective.

Rather than a narrow focus on Business Licence fee certification and collection, he told this newspaper that the exercise is a wider “revenue intelligence tool” designed to ensure “integrity across all tax types” and said the tax authorities “see no reason why there won’t be a high level of compliance from year one”.

Pointing to the better-defined guidelines in the new Business Licence Act, which set out what is expected of auditors/accountants in verifying a company’s annual turnover, Mr Wilson said the Government had previously discovered some “did not do the basics” in checking the accuracy of disclosures by corporate clients subsequently found to have under-reported revenues to avoid paying the full tax liability.

The Prime Minister, back in June 2023, said the Government through the enhanced Business Licence reporting regime was “encouraging better record-keeping within businesses and encouraging proprietors to be responsible for honest reporting”.

But 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