Saturday, Aug 24, 2019
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It’s not easy doing business in The Bahamas

Dear Editor,

Recent dealings with several government departments compelled me to seek to determine where The Bahamas was ranked in the world’s “ease of doing business index”.

It was not surprising to find that out of a total of 190 countries which are included in the index, The Bahamas was listed as 119th for 2018, which is certainly nothing to be proud of. In fact, it makes one sympathetic towards the 71 countries which are listed below The Bahamas, and one is compelled to ask how could it be more difficult.

It should, however, be a matter of serious concern to note that in 2009, The Bahamas was ranked 55th in the world and thereafter there were annual drops in our ranking until we fell to the low of 121st in 2017. The experts should, no doubt, be seeking to determine where we went wrong and what needs to be done to address the decline.

It is noted that New Zealand is listed as the easiest country in the world in which to conduct business. It is unfortunate that when the experts from New Zealand were in The Bahamas advising the previous administration on VAT, that the government didn’t take the opportunity to seek some advice from them in addressing that issue, although one might wonder whether the introduction of VAT had something to do with the drop in that in 2014 when they started the process to introduce VAT we were then ranked 84th in the world.

There is a continuing debate about what factors are taken into account in calculating the index, suggesting that the methodology used to determine the ranking is not fair. However, whatever method one chooses, it is simply frustrating doing business in The Bahamas.

There are certainly many factors which contribute to the frustration, however I will focus on one without even considering the inexcusable delays in receiving a response from the financial sector, the failure to acknowledge communications, the difficulty in speaking with someone, phone calls that go unanswered, messages or emails that are not responded to in a timely fashion – or at all.

It is not apparent whether the present state of affairs is due to lack of sufficient personnel, lack of adequate equipment, ill-equipped staff or some other factor, but whatever the cause, one thing is for sure, the government must view the issue as a matter of priority.

Here is my case in point: In order to obtain a business license, a company must be certified as “compliant”. As a part of the integrated system introduced with VAT, in order for a company to be considered compliant, any conceivable tax payable by the company or any shareholder of the company holding more than 20 percent of its shares must also be current including (among other things) their real property taxes.

Successive governments have suggested that the enormous arrears of real property taxes, which are listed in the annual budget report, are not accurate, and it would be difficult to dispute that statement. As a consequence of the confusion within that department, the Department of Inland Revenue, often wrongly, refuses to issue a tax compliance certificate to a company because, in its view, a shareholder of the company owes real property taxes.

In one instance with which I am concerned, the department listed six assessment numbers for one shareholder as being outstanding without identifying the properties covered by the assessments. After considerable delay, the properties were finally identified by the Real Property Tax Department. It transpired, however, that four of the properties listed were not even owned by the shareholder and the remaining two were purchased by the Bahamian shareholder from a foreigner more than 15 years previous with proof provided to the tax department that the taxes were paid up to the date of the acquisition and are tax exempt since the purchase.

Something is seriously wrong when the Inland Revenue Department, even after being provided with the appropriate information and evidence, is still unable to issue a compliance certificate. The party has not in fact received an acknowledgement of receipt, much less a response after more than three months. As a consequence, the company is unable to obtain a tax compliance certificate and the business owner is unable to obtain a business license. The next thing the department may do is seek to impose a fine for not having a valid business license. Regrettably this is not an isolated instance.

You will appreciate that the country will be unable to climb up the ease of doing business ladder with this type of treatment, particularly when you realize that this issue is only the tip of the iceberg.

May I suggest that until the state of affairs at the Real Property Tax Department is addressed, the alleged failure to pay real property taxes in the circumstances enunciated above should not be used as a reason to refuse to issue a tax compliance certificate to a business owner?

In the meantime, the government must give immediate consideration to addressing the numerous frustrations faced by anyone seeking to conduct business in this country, the issue of obtaining a tax compliance certificate being only one of them.

It is understood that these concerns are nothing new, however, it is imperative that they are addressed now.

– Richard Lightbourn

Front Porch | Bahama
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