Chamber Position on Business Licence Fees: 

 

NASSAU, BAHAMAS – Based on information available, Small and Medium Size Enterprises (SMEs) represent nearly 80% of the total number of businesses registered on the Business Licence Register, which is further supported by the number of SMEs registered as Value Added Tax (VAT) registrants.

Effective July 1, 2013, amendments to the Business Licence Act, 2010 increased business licence fees. During the dialogue between the BCCEC’s Coalition for Responsible Taxation and the Government of The Bahamas regarding VAT and its implementation, there was a recommendation for the Government of The Bahamas to revisit business licence fees and consider returning the fees levels, at a minimum, to pre-July 2013 levels; this matter remains outstanding. Further, the Government of The Bahamas’ White Paper on Tax Reform to Secure Adequate Revenue for Future published in February 2013 set out a plan to restructure business licence fees. An excerpt is included for your reference:

“As a means of achieving these objectives, it is proposed that a Value Added Tax (VAT) be introduced as of July 1, 2014 as part of a fundamental reform of the tax system. In tandem, we also propose to:

– effect the eventual reductions in import duty rates that will accompany The Bahamas’ accession to the World Trade Organization (WTO);

– reduce excise tax rates to compensate for the VAT;

– eliminate Business Licence Tax as currently structured; and

– eliminate the Hotel Occupancy Tax.”

Of the four (4) planned tax reform initiatives set out by the Government of The Bahamas above, three (3) have been initiated with ongoing efforts, however the initiative regarding Business Licence Tax has not been addressed.

The matter of business licence fees was further exacerbated by the amendments to the Business Licence Act, 2010 effective July 1, 2015, which set a requirement for businesses earning annual revenue of $100,000 or more to have the financial information included in the Business Licence Renewal Application certified by a licensed member of the Bahamas Institute of Chartered Accountants.

The BCCEC has publicly stated its concern that this threshold is too low and will create a further burden on small businesses, when factoring in the costs to have financial information certified by an independent practitioner. Further, this threshold does not take into consideration the cost:benefit relationship of certification, as well as the available verification procedures created by VAT filings. Previous legislation had this threshold at $500,000 and later at $1,000,000.

The BCCEC’s position is that the threshold should be increased significantly, and at a minimum, a threshold of $400,000 in total revenue be established as the trigger for an independent practitioner’s certification of financial information included in the business licence application process, which coincides with the threshold for VAT registrants that must file at least quarterly.

Further, the Business Licence Act, 2010 requires businesses to have their business licences renewed by the end of January, 2016 or face stiff financial penalties, which is impractical to have financial records for the previous year completed and subject to an independent attestation exercise and adds to the level of frustration being experienced by these businesses.

Many SMEs in The Bahamas remain on the brink of financial collapse and are at great risk of closure because of the very tight economic conditions facing The Bahamas today and the increase in overall costs required to run their businesses. This risk is further heightened by the still high cost of doing business in The Bahamas, including the very high cost of energy. Leaving the business licence fee structure as is will very likely contribute to the shuttering of many of these businesses, which represent the lifeblood of the Bahamian economy.

The BCCEC therefore appeals to the Government of The Bahamas to move quickly to evaluate the existing business licence fee structure in light of VAT implementation and the proposals included in the White Paper; the BCCEC is willing to assist in such an evaluation and make recommendations that lead to a business licence fee structure that balances the overall costs to businesses with the Government of The Bahamas’ overall tax and fiscal reform programmes. We further appeal to the Government of The Bahamas to immediately increase the threshold for businesses that are required to have the financial information included in their business licence application certified by an independent practitioner and waive the imposition of late filing penalties to coincide with the deadline for submission of payment of business licence fees, which is the end of March, 2016.