Courier firms blocked on ‘seven figure’ tax arrears

• Several suffer import halt on Treasury debt

• One confirms ‘issues’ with clearing goods

• Top official hits out over ‘repeat offenders’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Several courier companies have been temporarily barred from clearing imported shipments over their failure to pay up to “seven figures” in due taxes to the Government, a top official confirmed last night.

Simon Wilson, the Ministry of Finance’s financial secretary, described the situation with the industry as “an ongoing problem” given that operators can quickly build up substantial tax arrears due to the high volume of goods they are clearing on a daily basis.

Given that couriers are effectively monies provided by their clients to pay due taxes on trust, he told Tribune Business the Ministry of Finance and Department of Inland Revenue “don’t look very favourably” on those who either fail to pay in full, on time or are guilty of both offences. 

Describing some firms as “repeat offenders”, Mr Wilson did not identify the culprits, or give specific figures for the sums involved, but told this newspaper the arrears accumulated by individual couriers before a block was placed on their activities has run into “seven figures” or millions of dollars. 

Pledging that the tax authorities will “work through it” to ensure all couriers come into compliance with their obligations, he added that the halt imposed on their activities until they become current typically never lasts more than “a day or two” because their operations are otherwise completely shut down and they stand to lose clients, their reputation and, potentially, go out of business.

Asked by Tribune Business to confirm whether several courier companies have recently suffered Customs-imposed halts to clearance of their clients’ import shipments, Mr Wilson replied: “I think that’s correct. If they owe taxes they are collecting in trust we will hold their shipments until they pay it. It’s probably a variety of things, and this is one of them.”

All courier companies were mandated by the Department of Inland Revenue to produce a Tax Compliance Certificate, showing they are current with VAT, import tariffs and other taxes, by March 13, so the recent crackdown could also be related in part to the failure of some to obtain the required paperwork by that deadline as well as pay what is owed to the Public Treasury.

Tribune Business contacted Mr Wilson after being informed that several courier companies were recently barred from importing goods into The Bahamas on their clients’ behalf. One, whose name this newspaper is withholding for legal reasons, was alleged to owe the Customs Department nearly $300,000 in unpaid taxes. It was warned by the authorities that it had to pay the full amount before it would be allowed to resume normal operations.

This directive was said to have been issued by Ralph Munroe, Customs comptroller, acting on instructions from Mr Wilson. Tribune Business was told that Mr Munroe was in a meeting when it called for comment, and was directed to speak with Mr Wilson instead.

Meanwhile, the floor supervisor at the courier said to have owed $300,000 did confirm it had encountered “issues” with importing goods for clients over the past two weeks. However, senior management has said nothing about the matter, and the firm has resumed shipment clearance as of yesterday. Well-placed sources, speaking on condition of anonymity, said customers had been complaining they had shipments that were due and could not get them.

Mr Wilson yesterday said Customs and the Government are focused on treating tax-compliant courier companies “fairly and quickly”. He indicated that non-payment of taxes by operators in this sector was especially egregious since it did not involve their own money but, rather, funds that have been provided to them by clients to clear shipments and pay their due obligations to the Public Treasury.

“They’re not remitting taxes,” the financial secretary said of the offenders. “Our concerns really with courier companies are that if you are collecting a sum of money from the client, and that sum of money is for Customs duty on whatever is imported, and you don’t pay the Government out of that sum......

“You have a Customs bond, and you are collecting money in trust. You’re collecting money on behalf of the Government from a client, and you don’t pay that money to the Government in a reasonable period of time. We don’t look at that very favourably. We don’t. Then, in some cases, some companies are repeat offenders.

“It is an ongoing problem. We’ll work through it. Hopefully these companies will be in compliance pretty soon and things will work out. In some cases it can be substantial amounts and that’s a concern.” When asked whether the tax arrears owed by individual courier companies was as high as six figures, Mr Wilson replied: “Seven figures, not six. Seven figures. In some cases it can be very substantial amounts.”

This implies that firms can build up tax debts worth millions of dollars. However, while the Government’s ability to effectively shut the culprits down usually ensures it collects what is due, delayed payments impact its cash flow and also increase the possibility that some taxes may go missing or not be paid.

“These are high volume companies,” Mr Wilson told Tribune Business of the couriers, “and if they don’t focus on making timely remittances these arrears can run up pretty quickly.” Asked how quickly offenders responded to being shut down, he added: “I think it would be fair to say that most companies immediately afterwards make the payment. The halt is never more than a couple of days or a day or so. It would be unusual for a halt to be more than a day. Very, very unusual.”

Asked what was required to improve compliance, the financial secretary said: “Better enforcement. I think it comes down to better education and enforcement with these couriers. If you don’t pay attention it can run up very quickly. It’s a high volume business. You can be lax, and not pay attention, and before you know it you can have a pretty significant sum outstanding to the Government. Nobody intends to do it, but if you don’t pay attention it can blow right up.”

Comments

Bigrocks says...

Ah the TCC. Ours was denied and now cannot import anything. Cause NIB said we were not compliant. Seems after 22 years of monthly payments, 1 was missed during Lockdown in 2020.
Reason, an NIB employee working from home fouled up the payment entry.

Think that an easy fix? Hell no. Will go down to NIB for the third time with the stamped C10, bank statement and canceled check. Seems you need some higher up to correct it. But they are never in office nor can be reached. Typical Government office where plenty of people work but cannot get anything doe but shut you down with ease!

Posted 30 March 2023, 10:40 a.m. Suggest removal

ThisIsOurs says...

Said this would cause chaos when it was announced. Another ill thought out economy impacting change. What they could have done was given the companies 6 months to come into compliance. I cant imagine that there are hundreds if not thousands of bahamians who now have critical supplies, some life altering e.g., medical supplies, caught up in another finance ... whatever you call these string of head strachers

Whos in charge? As the wheels kept stuck deeper in the mess, will wait for the PM to announce that he knew nothing about it

Posted 30 March 2023, 8:44 p.m. Suggest removal

BONEFISH says...

@ This is Ours. Do you know what you are talking about?

You don't understand . Do you? This is customs compliance issue which has nothing to do with the financial secretary.Bahamas Customs after doing a review,realize that some courier companies have cleared goods and have not remitted the prescribed duties in the appropriate time.
The persons who the courier firms cleared the goods for,already paid the duties to them .They have failed in part of their fiduciary duties.These duties don't belong to them and are not their cash flow for their operations. These duties rightfully belong to the Bahamas government. These firms know exactly what they were doing.It is really a form of arbitrage.
This is the same reason First Caribbean International Bank had a loss on some mortgages , a couple of years ago.The loss was in the million dollar range. I know one of the lawyers who fail in his fiduciary duty in that matter and subsequently disbarred. Some one also told me some of some Canadian real estate investors who got burned in a similar situation. They purchase property and the lawyer never paid to record the sale of the property. So they discovered,they have no title for the property they purchase in the Bahamas.

Posted 30 March 2023, 9:30 p.m. Suggest removal

ThisIsOurs says...

2 weeks ago, the PM made a public statement about a company that owed the govt 6.4 million in immigration fees collected on the govts behalf in addition to money related to the food program. Did the govt prevent the company from doing business? No the PM reported we've collected so much in cash, they returned a truck, a boat and we expect a few hundred thousand tomorrow and I assume that arrangement would go on until whatever fees were outstanding were collected. For that single business I would have said the govt could have put locks on the door, but they didnt.

**Was it 2 years ago that a govt report came out that revealed that hotels were behind on their electricity bills to the tune of hundreds of thousands,** I didnt get the impression that that was a normal *we resolve payables in 30 days* situation. **There was another report of hundreds of companies that were years behind on NIB payments. Was a decision made to cutoff the electricity to the hotels until they paid up? Were the businesses shutdown until they cleared up the outstanding NIB payments**? also a compliance issue. But the govt didnt take that action because they understood to do so would do more harm vs any good that would come from some businesses resolving all of their outstanding bills immediately.

I am aware of how VAT works, **I am aware that no business should be dipping into VAT for operational expenses, I never said *just let them continues as is, it's only money*. I said give them 6 months to resolve. That 6 months looks like anything that's deemed reasonable,** for example, current payments have to be up to date as well as the receipt of some payment toward the outstanding. If a business displays that they can't remit current payments then you take drastic action.

**What you're missing is that these couriers are a critical part of the economy in the absence of a functioning post office**. some persons use these couriers to receive medicine to live. I stood waiting in line at a courier a little over a year ago as a lady tried to resolve the location of her medicine. **I can imagine many other mission critical transactions that are now stuck as people shifted to using couriers instead of the unreliable post office.**

All I'm saying is, this is yet another baffling decision in a string of other such decisions when the same results could have been achieved by more temperate means.

Posted 31 March 2023, 2:37 a.m. Suggest removal

ThisIsOurs says...

An initiative the govt could undertake is having any business remitting more than 500,000 in VAT keep a segregated VAT account. **This would be a proactive approach to avoiding the buildup in the first place**. A part of their reporting would show the transfer of 10% of any revenue deposited to the account. I dont know all the inner workings of such a scheme and I understand that there's also the issue of VAT returns to consider for cash flow, so it might be the transfer of maybe 8%. the purpose is to show a segregation of the funds and that those funds are not being used for operational costs. I'm going on the assumption that opening a segregated account doesnt result in any undue burden on the business.

Posted 31 March 2023, 3 a.m. Suggest removal

BONEFISH says...

@ This is Ours. The situation with those courier firms would not be tolerated in other tax jurisdictions. Not in Canada, Barbados, the United Kingdom and definitely not in the United States.One of the major problems in this country is the low level of tax compliance in this country. Of course, the media in this country do not discuss or do not understand that.

Posted 31 March 2023, 7:21 a.m. Suggest removal

ThisIsOurs says...

Not paying electricity to the tune of hundreds of thousands of dollars would not be tolerated as well.

I'm not talking about what "should" have happened. Everybody agrees on what "should" have happened. Its egregious that someone would collect VAT fees from a customer and then use those fees that dont belong to them for personal or business expenses.

We are here.

Our options are to address the current reality with a solution that is disruptive and damaging or to try to have as little disruption as possible. The only difference between what you suggest and what I suggest is a notice to the business that we see what you doing, its illegal, stop it now, we give you 6 months to fix it. That's all.

A segregated account requirement so we dont have to have this same conversation in the next 6 months

Posted 31 March 2023, 7:35 a.m. Suggest removal

BONEFISH says...

I am not arguing with you. That is what is going to happen. The government will give them a period of time to remit the taxes that were collected by them. Situations like this has gone on in this country for years. A retired civil servant told me that. What is happening now ,is measures are taken to increase the level of tax compliance and reduce the level of tax delinquencies.

Bahamians like you who have studied aboard, should know this.

Posted 31 March 2023, 8:13 a.m. Suggest removal

ThisIsOurs says...

The news a week ago said business would be halted, this article said business would be halted. @BigRocks said his business was halted... due to govt employee error. I am saying this herky jerky approach is disruptive to commerce. Put in place measures so it does not happen or happens in reduced cases. Just because they operated this way for years doesnt mean it's the best way. Segregate the money. If after doing all of that a company is still unable to remit payments, sure put locks on the door, they either should not be in business or should be adjusting their business model. I'm talking about the big players, small business are trickier

Posted 31 March 2023, 8:54 a.m. Suggest removal

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