By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

BAHAMIAN credit unions yesterday pushed back on planned legal reforms that will eliminate the current VAT exemption they enjoy as the Central Bank’s Governor defended the move on the grounds of fairness.

John Rolle said that while all businesses are exempt from taxation on their profits, more clarity is needed in legislation regarding how credit unions pay VAT on their purchases. 

He added that there remain certain government taxes that may not apply to credit union operations, but that when these entities procure goods and services from the same suppliers as the general public, VAT becomes more relevant. “In the case of the Value Added Tax, it’s really dealing with the instances in which they are encountering that in their inputs to the operation, and making certain that there’s clarity in terms of how that is administered,” said Mr Rolle.

“I think there’s still some aspects of government taxes where, in transactions specific to the operations of credit unions, that the taxes are still not applicable. So those cases do not go away. It’s more reference to Value Added Tax in the context where these entities are procuring goods and services from the same providers as the general public.”A representative of a credit union said it currently only pays VAT on investment properties and that since the industry “fought” for its VAT exemption it should not be taken away. “That that was something that we fought for, having VAT removed from our members, not necessarily no place else. The only thing we pay that on now is our investment properties, nothing else. And so I don’t see how that should be taken back from us,” they said.

Mr Rolle conceded that more clarity is needed in legislation to determine which transactions should be subject to VAT and which should be exempt. He explained that while the current wording in the Cooperative Credit Union Act outlines certain tax privileges, the language could be more precise to eliminate ambiguity. 

“There’s more clarity that can be brought to this, but the way the provisions are written in the Cooperative Credit Union Act, I think they need to be expressed cleaner so that you remove any confusion as to whether, if you purchase say office supplies, or you’re paying your utilities bill, and/or some of those other instances, whether the same applies you,” said Mr Rolle

“You’re referring to Value Added Tax in the context of real estate. That’s basically replacing what used to be the Stamp Tax. So I can understand if that provision was intentionally kept. And those are examples where I think the clarity could be better, and some of the clarity might even be expressed in the Value Added Tax Act to help.”

The proposed Bill also introduces significant reforms to the structure of credit union committees, aiming to align governance practices with international standards. One of the main changes is the transformation of several existing committees into Board-level committees.

The Audit Committee is being formalized as a Board-appointed body, comprising two directors - one of whom must be a financial expert with recognized expertise in accounting or auditing, and who is not a member of the cooperative credit union.

While these reforms promote stronger Board-level oversight, the Central Bank has decided to retain the existing supervisory committee structure for now, even though it no longer aligns with international best practices. The supervisory committee, which reports to shareholders, will continue to operate as an oversight body, but the Central Bank plans to enhance its effectiveness through new regulations.

A participant noted the importance of the supervisory committee while raising concerns about the committee’s role and independence. 

“A lot of persons, they don’t realize that the supervisory committee, they have a lot of power. If they do what they’re supposed to be doing, they are very powerful. They can remove Boards. They could call special call meetings for the AGM, because they are an elected body. So that’s what we have to look at. The strengthening, and like across the board, for our supervisory committee member,” she said.