• Cut to 14 days 'wholly rejected as unworkable'

• Chamber: Changes leave business 'hamstrung'

• Top Finance official: We consulted pre-Budget

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian private sector yesterday said cutting the VAT filing deadline for firms with annual turnover exceeding $5m has been "wholly rejected as unworkable" despite the Government backing off its original 10-day target.

Khrystle L. Rutherford-Ferguson, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chair, said in a statement that slashing the time for so-called "large taxpayers" to submit returns and VAT payments from 21 to 14 days is prominent among multiple 2023-2024 Budget changes that threaten to leave the business community "hamstrung".

Branding the one-third, or week, cut in the VAT filing deadline for such businesses as arbitrary, she accused the Government of a "continued lack of good faith" in its dealings with the private sector - including either failing to consult, or not providing sufficient details and advance warnings of what it plans.

Pointing to "new business rules", and the slew of legislative reforms accompanying the Budget, as further concerns, Mrs Rutherford-Ferguson said this will create "extensive changes" for how Bahamas-based businesses operate and threatens to impose increased administrative costs, bureaucracy and red tape on numerous employers.

However, Simon Wilson, the Ministry of Finance's financial secretary, revealed to Tribune Business that not only did the Government meet with the Chamber prior to the Budget's end-May unveiling to address many of the key issues raised but, in response to private sector feedback, it modified its original plans to shrink the VAT filing deadline for "large taxpayers" even further.

He disclosed that the Davis administration had wanted to narrow this to just ten days after month's end compared to the current 21 days, but eventually opted to allow for 14 days or two weeks. Noting that many countries require "large taxpayers" to make VAT returns and payments within three-seven days of the taxable period's (month) end, Mr Wilson said The Bahamas will "have a problem" if its largest taxpayers cannot meet a 14-day deadline.

Reiterating that the 14-day deadline applies only to companies generating $5m or more in annual revenue, he added: "We're talking the largest companies here. If we are making the argument a company paying the Government $200m in revenue doesn't have an accounting system to pay and file in 14 days, we have a problem.

"In other countries, large taxpayers are given between three and seven days to file and pay. Here we are saying to these companies it's 14 days. Some people may make the argument that their accounting system is outside the country, but that's illegal and cannot be the excuse. The law says it has to be in-country."

Mrs Rutherford-Ferguson, in her statement about the Government's "policy shifts" on the Chamber's behalf, said: "It is unfortunate that these policy shifts are increasingly announced absent any proper prior consultation, or consultation that lacks sufficient details and advanced notice, in order to facilitate meaningful engagement with the business community to correct any clear missteps and ensure a smooth implementation.

Some of these policies include the reduction of the time required to submit VAT returns from 21 days to 14 days for large businesses with no extension allowed, a proposal wholly rejected as unworkable by our members impacted. In the brief time that we have had to consult our members post the announcement, a number of concerns have been voiced about the ability of businesses to meet this target.

"Further, there are concerns that the target continues to move arbitrarily regarding VAT filings. The short timeframe for implementation also fails to take into consideration the attendant costs of compliance with such a change." The Chamber chair identified these challenges as including "the implementation of new systems, including the cost to some businesses to utilise external professional services to meet the requirements of the rules".

Other issues include increased staff and administrative costs, and "the fact that some businesses receive the information that they need for VAT filings seven days after month end". Mr Wilson, though, revealed that the Government had both adjusted its "large taxpayer" VAT filing deadline in response to private sector concerns as well as met with the Chamber pre-Budget.

"They met with us," he told Tribune Business. "Our original proposal was for ten days. They met with us and we made an adjustment from ten days to 14 days. We met with large taxpayers and originally told them ten days. We're talking about the largest, most sophisticated taxpayers, not 'Mom and Pop' stores, paying $200m a year in revenue. There are 10-15 companies paying that substantial amount. I am pretty sure these 14 days don't present a problem for them.

"We're looking to increase our revenue target by about $400m next year. Every little bit counts. It improves the cash flow, and reduces the interest expense." Mr Wilson said the Government's meeting with the Chamber "covered the major topics" related to the Budget, including the creation of the Large Taxpayer Unit, although "obviously we couldn't cover all the topics".

Describing much of the Budget as "a clean up" of laws and regulations, he added that no new or rate increases were announced for major revenue streams. The financial secretary said it will also likely take two years to raise all fees to a level where the Government recovers the full cost of providing the associated public service.

Mrs Rutherford-Ferguson, meanwhile, also voiced concerns about the "new business rules" unveiled by the Prime Minister. Philip Davis KC, in leading-off the Budget debate, said the Government was "encouraging better record-keeping within businesses and encouraging proprietors to be responsible for honest reporting".

He added that 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. Such firms will be allowed to submit management accounts as verification of their turnover sums.

However:

• Businesses with annual revenue between $250,000 and $500,000 will require accounting certification by an independent accountant

• Businesses with turnover between $500,000 and $2.5m will require a compilation report by an independent accountant

• Businesses with revenue between $2.5m and $5m will require a review statement by an independent accountant

• Large taxpayers, namely businesses with turnover above $5m, will require audited financial statements produced by an independent accountant

Mr Wilson yesterday said this applied just to Business Licence filings, and had a two-fold objective. Besides expanding the number of businesses no longer needing to use an accountant's services to verify turnover, by raising the threshold from $100,000 to $250,000, the move also progressively tightens the verification process for larger companies in a bid to prevent tax evasion and avoidance through under-reporting revenues for Business Licence purposes.

Given that Business Licence fees are due for payment by end-March, the attestation - including the provision of audited financial statements - will have to be completed within 90 days. Several sources suggested meeting such a deadline could be a stretch, and queried whether there are enough auditors and accounting firms to go around.

However, Mr Wilson said: "I think people make these statements generally, but this is the 21st century Bahamas not the 20th century. We have quite a few auditors and audit firms." Yet the Bahamas International Securities Exchange (BISX), for example, allows its publicly listed companies 120 days or to end-April to submit audited financials.

When this was pointed out, Mr Wilson replied: "We're the Government. If you have a legitimate reason why you need an an extension, there are provisions in the Business Licence Act to accommodate that."

Yet accountants, speaking to Tribune Business on condition of anonymity, queried why large taxpayers are being required to supply audited financial statements for Business Licence purposes when only top-line turnover needs to be verified for purposes of calculating the fee. And they also questioned why the option of an extension is not available to large taxpayers on their VAT filings.

Mrs Rutherford-Ferguson argued that the private sector should have received more advance warning of changes due to take effect on July 1. "It continues to be a missed opportunity for the Government not to avail itself of the fantastic wealth of experience and information that resides within the Chamber and our membership," she said.

"With proper consultation and partnership between the public and private sectors, we can maximise the benefits that the economic recovery is providing and minimise disruption to our critical business sector. Today, we are hamstrung by the uncertainty and insecurity that the lack of timely and reasonable consultation on policies continues to present....

"We trust that the Government will rethink its approach to several impending policies which will undoubtedly have a significantly negative effect on how business is conducted and resources are staffed. A successful economy is built upon a successful business community, and we trust that a government, determined to succeed, will heed our interventions in this regard."