By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Cabinet minister is accusing the Government of devising laws that permit the tax authorities to “run amok” over law-abiding businesses who are constantly placed at a disadvantage.

Dionisio D’Aguilar, ex-minister of tourism and aviation under the Minnis administration, told Tribune Business that the changes to VAT and other tax-related legislation accompanying the 2025-2026 Budget are reinforcing the belief that the Government is focused on “designing systems that make it more difficult” for tax-compliant businesses to invest and grow.

Asserting that “a new level of bureaucracy” is seemingly being imposed on the Bahamian private sector “every single day”, the Superwash principal, who has multiple other business interests, said politicians then turn round and “wonder why” the Bahamian economy’s annual growth is projected to slow to 1.7 percent, and then remain flat at 1.6 percent, over the next three upcoming Budget cycles to 2027-2028.

And, while agreeing that the Department of Inland Revenue must be “empowered” to collect all outstanding taxes due to the Government, Mr D’Aguilar told this newspaper that existing laws as well as the reforms tabled in Parliament alongside the Budget “give them all the power to the detriment of the business and consumer”.

In particular, Mr D’Aguilar pointed to the existing statutory requirement that businesses must pay over the entire VAT sum that is in dispute before they can challenge the Department of Inland Revenue’s assessment before the Tax Appeals Commission.

Suggesting that the uncertainty, time and expense associated with mounting such challenges means many businesses elect not to bother, he also argued that those who succeeded often faced a long wait to recover their funds - the exact opposite of tax authority demands that taxpayers make timely payments in full.

And, besides pointing out what he hinted were double standards, Mr D’Aguilar also slammed proposed reforms that effectively mean Bahamian businesses will have to close down before they can claim a refund of VAT credits if these are not used up in the tax reporting immediately after the one in which they were created. He added that “no right-thinking, decent Bahamian will think that’s right”.

The VAT (Amendment) (No.2) Bill 2025, tabled in the House of Assembly alongside the 2025-2026 Budget, does provide for a new section 56A and related changes which stipulate that the VAT comptroller must refund companies any VAT “overpayment” within two months of deciding to do so. Failure to meet this deadline will result in unspecified “interest” charges being added to the payment.

Prime Minister Philip Davis KC, while referring to the new “overpayment” provision in his Budget debate lead-off, made no mention of the changes to VAT credit refunds. The latter are different from any “overpayment”, as they are generated when a company makes a monthly and quarterly loss and, as a result, ends up paying more VAT on its ‘inputs’ than it sends to the Government.

“I’ve always felt that the Department of Inland Revenue has had far too much power over businesses,” Mr D’Aguilar told Tribune Business. “The Department of Inland Revenue must be empowered to collect taxes that are due and owed, but one has to recognise that the Department of Inland Revenue can be wrong.

“Unfortunately, our laws give them all the power to the detriment of businesses and the consumer. For example, if they deem you owe taxes, it seems the only way you can contest their claim is to first give them all the leverage, pay the money that is disputed and then contest it.

“Then, if you should win, while the Department of Inland Revenue enforces a severe penalty if you don’t pay them on time, you have no way to get them to pay you on time. You are at their whim and pleasure. It is inherently unfair. If you want people to pay you on time, you should respect them in repayment of fines, penalties, payments in error. You should refund them on time,” he added.

“Unfortunately, because civil servants are invariably the ones who put together these laws, they always craft it where the Government has the leverage and ordinary businesses and consumers are at a disadvantage. They should understand they are in place to serve the consumer, serve the public, and what’s fair for the Department of Inland Revenue is fair for the public. They should pay us on time.”

Mr D’Aguilar said the fact the disputed VAT amount must be paid upfront, as well as the cost and time associated with any Tax Appeals Commission challenge, represented a deterrent for many companies. “I really don’t know how you design a system that really puts the consumer and businesses at a disadvantage,” he reiterated.

“If the Department of Inland Revenue comes along and imposes a penalty that a business doesn’t feel it owes, the business then has to decide is it worth fighting it and engaging legal counsel to reclaim what’s probably mine? Inevitably, time, effort and cost forces businesses to say: ‘Let them keep it’. That’s not right; that’s not right.”

Mr D’Aguilar, though, hailed the Government’s seeming decision to reverse planned reforms to the Business Licence Act that would have eliminated the ability for companies to be heard in advance, and potentially prevent their closure by the authorities, and replaced it with amendments permitting them to only challenge a licence revocation and suspension after it has occurred.

Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, told the House of Assembly late on Wednesday that “that provision is going to be amended so that there is the requirement to show cause”. In effect, this means restoring what is presently in the Business Licence Act and permitting companies to challenge the revocation or suspension before it happens.

“At least common sense prevailed,” Mr D’Aguilar told Tribune Business. “I heard the deputy prime minister, and am thankful he’s a businessman. I’m hoping he’s the wise head around the table, telling people: ‘Come on guys, we have to let people challenge it’.” 

The former Cabinet minister, though, was far less welcoming of reforms that will severely restrict the ability of Bahamian businesses to claim VAT credit refunds. “That is absolutely.....” he began. “It seems so unreasonable to me that you build up VAT credits with the Department of Inland Revenue.

“They say, yes, you can apply it to the next period and, if not absorbed by VAT in that next reporting period, you can somehow never get the remainder refunded. To me, that’s blatantly business-unfriendly. It seems as if the Department of Inland Revenue is being empowered to run amok over the business community, and the business community has no recourse.

“If you don’t absorb your VAT credit in the reporting period that immediately follows,then you are out of luck. That’s wrong. It’s just wrong. I hate the way that the Government is empowering itself to run amok over its citizenry. The Government represents the citizenry but, in essence, they are taking the money and saying that’s right,” Mr D’Aguilar continued.

“If you don’t pay them, they will lock you up, name and shame you, and shut your business down. But if they don’t pay you, they’re fine. I don’t know what right-thinking, decent Bahamian, thinks that’s right. It’s wrong. Why would you do that? Why propose such legislation that disadvantages businesses?”

VAT credits are generated when the amount of tax a company pays on its ‘inputs’, meaning goods and services used in the production process, exceed the amount it collects from consumers on its ‘outputs’. These are the finished goods and services it sells to end-users.

The present VAT Act stipulates that, if these credits are not totally used up as an input tax deduction in the next VAT filing period, be it monthly or quarterly, then the impacted company can apply to the VAT comptroller for a refund of any outstanding monies.

However, the VAT (Amendment) (No.2) Bill 2025, tabled in the House of Assembly alongside the 2025-2026 Budget, mandates that - if these credits are not exhausted in the following tax reporting period - a company can only claim for any “excess” after they have applied to cancel their VAT registration.

“The Comptroller must allow a claim for a refund where the registrant’s registration has been cancelled; the VAT return for the final tax period has been filed; and the Comptroller is satisfied that the registrant is entitled to the amount of the refund claimed,” the Bill states. And the time to claim for a refund has been narrowed from three years to one year after the “right to apply” was created.

Mr D’Aguilar said: “Sometimes I think our politicians design laws to catch the 1 percent, 2 percent, 3 percent of people who are cheating and evading their taxes rather than design a law to make it easier for the 95 percent who are compliant...

“They have emboldened the Department of Inland Revenue to run amok on the business community. I understand the need to collect taxes, for people to pay taxes, and they must pay their fair share. However, we must balance that with a level of recourse to ensure civil servants and persons in that Department don’t run over businesses....

“You can tell these laws are coming to empower them to be even more ruthless and unfair in their dealings with businesses. We’re not all criminals. The vast majority of us are paying our taxes. Stop designing systems that make it more difficult for law-abiding people to operate.”