• D’Aguilar slams 1-2% of revenue sanction

• Says firms set up to fail through lack of time

• Others argue they ‘can’t have it both ways’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Cabinet minister yesterday slammed the “outrageous” fines for Business Licence audit non-compliance even as government officials questioned why there was so much private sector anxiety.

Dionisio D’Aguilar, Superwash’s principal, and ex-minister of tourism and aviation, branded penalties equivalent to 1-2 percent of a company’s annual revenue as “just crazy” should they miss the deadlines for filing their audited financial statements or commit some other infraction.

Speaking after attending yesterday’s meeting between the Bahamas Institute of Chartered Accountants (BICA) and Department of Inland Revenue officials, which was called to resolve concerns over the enhanced Business Licence verification requirements, he told Tribune Business he left “getting more afraid” his business will be found non-compliant come end-April or June next year.

Asserting that this would result from his, and other companies with annual turnover exceeding $5m, having been given insufficient time to ready their financial records for the full audit the Government is now demanding, Mr D’Aguilar queried how verifying his salary bill and utility expenses will generate more revenue via the turnover-based Business Licence fee.

Simon Wilson, the Ministry of Finance’s financial secretary, “made it quite clear” to attendees at the BICA meeting that the Government will not agree to a year’s delay in implementing the audit requirement for firms with turnover of $5m or more - as requested by both the accounting profession and Bahamas Chamber of Commerce and Employers Confederation (BCCEC).

As a result, the position remains that audited financial statements for Business Licence purposes must be filed by April 30, 2024. While an extension may be granted until end-June 2024, companies must provide sound justification for this when they apply, and Mr D’Aguilar said whether they gain the extra two months is left to the Department of Inland Revenue’s discretion.

Mr Wilson yesterday argued the Bahamian private sector has been given more than sufficient time to ready itself for the enhanced Business Licence verification requirements, as discussions with the Chamber and BICA had begun as early as March this year prior to the necessary legal reforms being enacted on July 1 with the Budget. And auditor numbers were more than adequate (see other article on Page 1B).

But based on yesterday’s meeting, the Superwash chief said those firms that miss the audit filing deadlines are exposed to penalties and fines “equivalent to 1-2 percent of their revenue”. For companies with a $5m turnover, this equates to sanctions worth between $50,000 and $100,000, while those enjoying a $10m top-line could face between $100,000 to $200,000 in exposure.

“The Department of Inland Revenue seems to be of the view that there are many, many businesses that are non-compliant with VAT, Business Licence and real property tax,” Mr D’Aguilar said. “Their view is, yes, there are honest ones, but we are going to build our response around dishonest ones in the market. Yes, the innocent will suffer for the guilty, but the number is insignificant for us to worry about.

“If a company is law abiding, doing what it’s supposed to be doing, compliant with the law, their position is to get an audit done in the next four months or you pay 1-2 percent of your revenues as fines. It’s just outrageous, just crazy. You’re just penalising all the business community because you believe the vast majority of them are non-compliant.”

The ex-Cabinet minister argued that some $5m-plus turnover firms, especially those that are privately owned and have never needed to previously undergo a full audit, are effectively being driven into non-compliance because they have not been allowed sufficient time to get their financial records, processes and resources in position for the enhanced level of scrutiny.

While many will believe that multi-million turnover companies will have no difficulty absorbing these fines, Mr D’Aguilar said low margin businesses already struggling with the high cost of doing business will be further squeezed.

“I’m sure there are companies that have $5m, $10m, $20m worth of bills that don’t make any money,” he added. “I was once on the Board of AML Foods when we had $100m in sales and did not make any money.

“On top of that, now the accounting profession has basically been put on notice by the Department of Inland Revenue that some have been certifying documents they shouldn’t have been certifying or have been certifying inaccurately.

“The accounting profession is afraid to take on clients that might pose a risk to them because they are on the hook as accountants. If they certify a document inaccurately, the Department of Inland Revenue will come for them. I heard one accountant yesterday say they will not do this; it’s not worth the risk.”

Mr D’Aguilar added that he was further concerned by the fact that the Government’s definition of turnover, for Business Licence purposes, is different than that employed by International Financial Reporting Standards (IFRS). Based on the conversations he heard between BICA members yesterday, the ex-minister said some of them were confused as to what is turnover.

“As a businessman I was sitting in that room getting more afraid,” the Superwash chief added. “I thought I was compliant, but now I don’t know. The [accounting] industry is saying we’re not ready, we don’t have the capacity and the Department of Inland Revenue is saying: ‘Figure it out, and if you don’t get it done by then will impose a fine.

“You are thinking you are tax compliant. You are thinking you are a law abiding citizen but, come April, if you don’t have the statements you will be looked at as a criminal and will be fined. I don’t quite understand how the audit of my salaries and wages, the audit of my utility bills, the audit of my expenses is going to generate any more revenue for the Government.

“The Business Licence fee is based on sales. Me spending $50,000, $60,000 or $70,000 to go out and get an audit, it’s automatically more expensive. What’s that got to do with my revenue? I’m getting my revenue certified now by my accountant. How’s this going to impact the yield they get from revenue? Focus on revenue. If they have to audit revenue, shift to that, rather than go to full financials.”

Mr D’Aguilar said the “takeaway” from yesterday’s meeting is that the Government is moving ahead with the Business Licence audit roll-out, and there will be no delays, even as he challenged: “What’s the rush?” He added: “I left that meeting so discombobulated. We are so afraid now of being accused of trying to defraud the Government when our intentions are good.”

However, some attendees yesterday backed the stance taken by Mr Wilson and the Government. One, speaking on condition of anonymity, said: “Simon was very firm in his position. I am not sure I am opposed to Simon.

“Simon gave a very good example. How come companies are reporting to their creditors, they are providing financial information, yet when the Government of The Bahamas asks for the same information they are fighting about it? You cannot have it both ways. For a country to survive, it has to have a good tax structure.”