• Business ease focus before tax reform

• Tax, licence 'hold ups' causing delays

Super Value's president says that, while profit-based taxation "would be favourable" for food retailers, the Government must first prioritise the ease of doing business because "things aren't flowing like they should".

Debra Symonette, although welcoming the potential switch from the turnover-based Business Licence fee to a corporate income tax, told Tribune Business the 13-store supermarket chain had recently experienced "hold ups" and delays in getting produce to its stores because it had not received its Tax Compliance Certificate (TCC).

Stating that there was "nothing they should be holding up on the certificate for", she explained that its absence had been "really annoying" because a TCC must be presented to Customs when clearing imported shipments off the dock. The inability to produce one had caused complications for several months, hampering goods clearance until Super Value was finally issued with a temporary TCC.

And Ms Symonette said the supermarket chain has experienced similar issues with its Business Licence renewal. While the necessary fee has been paid, and issuance approved, she disclosed that Super Value has yet to receive the actual licence for wall display from the Department of Inland Revenue.

Bahamian retailers and wholesalers, according to the Government's just-released 'green paper' on "corporate income tax strategies for The Bahamas, will be among the industries set to gain most from the proposed switch away from the current turnover-based Business Licence fee. However, Ms Symonette suggested there are more immediate priorities for the Government to resolve that will get commerce and economic growth moving faster.

"The only other thing we have a problem with is getting the Business Licence even when we pay and submit the application on time," she told this newspaper. "We still don't get the licence. Up to now, we've been approved, but haven't gotten the actual paperwork. If they [the authorities and police] come in and see we don't have it on the wall, they question us as to whether we've paid and why we've not got it on the wall; that type of stuff. It's not our fault; they just haven't issued it."

Similar frustration exists over Super Value's TCC, which is required by itself and all other Bahamas-based companies as proof they are fully compliant with all due tax liabilities to the Public Treasury and National Insurance Board (NIB). Failure to produce or obtain once can impede doing business with the Government, including the receipt of payments due from the latter, as well as the ability to clear imported goods shipments through Customs.

"The other thing we're having an issue with is the TCC," Ms Symonette told Tribune Business. "Just like how long they have taken to issue the Business Licence, they have taken long to issue the Tax Compliance Certificate. There are a lot of things that depend on that certificate.

"Government agencies require you to have that certificate in order for them to pay you, and in order for you to get your goods off the dock, yet there's a big hold up in getting the actual certificate. Things aren't flowing like they should be. They're having some issues that they need to straighten out. It's just a matter of getting these things straight and getting the actual certificate. It's nothing they should be holding up on the certificate for.

"We've been issued a temporary one [TCC], but before that we had been waiting several months. That was a problem. We've only had the temporary one for a month or two. Both of them are very important because both of them hinder you getting your business done in a timely fashion if you don't have them," Ms Symonette continued.

"We really shouldn't be held up because of that. It's really annoying as you go to pick your stuff up off the dock and, because you don't have this certificate [TCC], you can't get the stuff to put in your stores that customers want to buy. We need things to flow smoothly because we have to have produce in the stores on time for customers to buy, and we need shipments off the dock before others come in.

"It's also vexing to the customer to go in and be asking: 'Where's the stuff?'. They're not going to be happy with us saying the stuff is on the dock. Ease of doing business... they need to get on with that." Still, Ms Symonette said she supported the proposal to switch the basis of direct Bahamian corporate taxation away from the turnover-based Business Licence fee to net earnings and profit margins.

"I think that would be pretty good because right now you could be earning a whole lot but profits are not that much," the Super Value president explained. "It could be a bit unfair. If they switch to a profit-based tax that would be favourable. I think most in the industry would be in favour of that.

"If your turnover is high, and you have a lot of expenses and they tax you on that turnover, it would be a bit unfair because your profits may not be that great. They're just looking at turnover and thinking you're making a lot of money when there's a lot coming out of that turnover. It's a substantial amount."

Many in the Bahamian private sector have long favoured reforming the existing Business Licence fee regime, which is based on turnover rather than corporate profits. It is viewed as a distortionary tax that disproportionately penalises high turnover/low margin businesses, such as food stores and gas stations, while favouring high margin/low turnover entities such as services firms

It also causes further complications for companies who sell a significant volume of price-controlled goods, and often leads to companies paying more in Business Licence fees than they earn in annual profits while others are effectively taxed into a loss.

The Government's 'green paper' acknowledged these concerns as it noted the higher margins enjoyed by some industries that paid the same Business Licence fees, based on turnover, as their lower margin counterparts. Real estate and recreational activities, both enjoying earnings margins of close to 40 percent based on EBITDA (earnings before interest, taxation, depreciation and amortisation), were shown as paying Business Licence fees equal to 1 percent of turnover.

The latter percentage was equal to wholesalers and retailers who, while also paying almost 1 percent of their turnover in Business Licence fees, earn an EBITDA margin of just 5 percent.

"For example, the wholesale and retail trade sector and recreational activities sector each pay 0.9 percent of turnover, on average, to the Business Licence fee. However, businesses in the wholesale and retail trade sector are estimated to have a lower profit margin than businesses operating in the recreational activity sector (6 percent compared to 40 percent)," the 'green paper' said.