By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Briland tourism business was hit with a $320,000 “maximum penalty” for its failure to pay more than $800,000 in due VAT and Business Licence fees over the five years to end-March 2023.

The Department of Inland Revenue’s (DIR) ten-page report on its audit of Conch & Coconut Ltd, which has been disclosed in Supreme Court filings due to the bust-up between its Bahamian and US partners (see other article on Page 1B), reveals that the boat, golf cart rental and tour and “concierge” provider submitted less than 30 percent of mandatory quarterly VAT filings during that period.

La Paige Gardiner, a Department of Inland Revenue official, in a June 2023 letter sent to Julian ‘Shaq’ Gibson, Conch & Coconut’s Bahamian principal, said given “the degree of non-compliance” the Bahamian tax authority had initially proposed a penalty equal to 50 percent of the outstanding taxes - some $385,756.

However, writing on behalf of Simon Wilson, the Ministry of Finance’s financial secretary, and Shunda Strachan, as acting VAT comptroller, she relented slightly by conceding that the “maximum penalty” in Conch & Coconut’s situation was $320,000. “The Department’s expectations are that businesses will take seriously the requirements to meet both the Business Licence and VAT legislation,” Ms Gardiner wrote.

The Department of Inland Revenue imposed a $150,000 sanction for “making an omission, false or misleading statement” over Conch & Coconut’s VAT liabilities, while a further $100,000 and $70,000 was levied for “failing to keep reliable accounting records” and not issuing a legally compliant VAT sales receipt, respectively.

The audit found that “further VAT and Business Licence tax is due and payable” worth $770,760 and $29,795, respectively, by Conch & Coconut for the five-year period between April 1, 2018, and March 31, 2023. Together with the combined $320,000 in penalties, the well-known Harbour Island tourism business was hit with a total demand for $1.12m by the Bahamian tax authorities.

Conch & Coconut paid off sufficient tax arrears to secure the re-opening of its operations, and return of seized assets, following a Department of Inland Revenue raid towards the end of March 2023. A payment plan was agreed for the remaining $800,000 balance.

Meanwhile, detailing the Department of Inland Revenue’s findings, the letter said of Conch & Coconut: “A review of the summary profile revealed that 15 tax returns were outstanding over the course of four years. Within the five-year audit period, you filed tax returns for six periods out of 21 periods.

“For three periods you reported zero taxable supplies and no VAT payable, and for the other three periods you reported taxable supplies inclusive of VAT of $8,561 and VAT payable in the amount of $760.50.” The Bahamian tax authority’s audit also found that Conch & Coconut “filed for zero taxable supplies and VAY payable” for the tax years from 2019 to 2022.

“It appears that you have made no reasonable efforts to correctly report your income as it would have been obvious to any reasonable person that you had earned revenue when you reported that you earned no income,” the Department of Inland Revenue blasted.

“By failing to report the correct amount of taxable supplies earned in each period, you have made an omission or a false statement to the comptroller. The statements presented show that your behavior was intentional and you have a trend of not meeting your obligations as prescribed in the VAT and Business Licence Acts.”

The Department of Inland Revenue revealed that a “bank analysis” of Conch & Coconut’s deposits showed that, based on 2023 first quarter projections, it had grown into a business on track to “generate approximately $4m in taxable [VAT-able] supplies” for the year at an average of $1m per quarter.

Detailing the breaches of the VAT Act and its accompanying regulations, the Department of Inland Revenue added that the “bank deposit analysis” showed funds paid to Conch & Coconut by its clients were “being deposited into another account” other than the ones designated for its operations.

“The records provided for the audit period did not correctly document and explain all taxable transactions and were deemed as unreliable,” the Bahamian tax authority concluded. “The Department was unable to agree the total amount of each payment type to the bank accounts provided…..

“The bank accounts provided did not contain any cash deposits from services rendered. By not maintaining these records, you have failed to maintain up-to-date and reliable accounting records.” Conch & Coconut’s VAT sales receipts were also deemed non-compliant with the law because they did not specify the amount of VAT or rate charged to consumers among other flaws.

“We identified that the turnover for Business Licence purposes was greater than that which was reported, and a further amount of Business Licence tax is due and payable for the years 2019 through 2023 assessment years,” the Department of Inland Revenue added. “The further Business Licence tax due and payable is $29,795.”