BAHAMAS: Mid-May launch for $100m tax offensive.

As published on tribune242.com, Thursday 2nd May, 2019.


The Ministry of Finance’s top official yesterday said its Revenue Enhancement Unit (REU) could reclaim up to $100m per annum from tax dodgers once it begins operations in mid-May.

Marlon Johnson, the acting financial secretary, told Tribune Business that the government’s long-awaited enforcement arm should be set up and ready to crack down on tax evaders within a matter of weeks once recruitment is finalised.

Confirming that accountants were being hired to staff the REU, along with existing public sector employees from revenue-related agencies, Mr Johnson said the unit will focus on value-added tax (VAT), business licence fee, customs and excise duties and real property tax collections in a bid to collect every cent due to the Public Treasury.

Voicing optimism that its work “will bear fruit in a reasonably short space of time”, and be felt throughout the upcoming 2019-2020 fiscal year, he added that while this year’s budget had suggested the REU could realise $80m per annum some forecasts had projected this number could be even higher.

Suggesting it could reach to $100m, Mr Johnson told this newspaper there were “substantial opportunities” to improve the Government’s revenue intake by targeting fraud, tax evasion and avoidance, plus monies that slipped through cracks in the system due to inefficiencies and poor administration.

In particular, he said the Ministry of Finance felt there was still significant “under-reporting” of VAT and Customs and Excise Taxes. To counter the former, the REU will be charged with comparing VAT registrants’ returns with their annual Business Licence fee fillings, as gross revenues should be the same, and with returns submitted by similarly-sized peers in the same industry.

“It will be done during the month of May,” Mr Johnson told Tribune Business of the REU’s creation. “We’re just finalising some matters. We’re hopeful to have it up by the middle of the month.

“From the intelligence we have, and as has been reported before, there’s substantial numbers we believe to enhance the revenue collection. I suspect, on an annualised basis, we have between $80m to $100m, as per the Budget target.

“We anticipate that once this units gets going and focused on its activities it will substantially enhance collections and show some fruit in a reasonably short space of time.”

The failure to establish the Revenue Enhancement Unit, and make it operational in time for the 2018-2019 fiscal year, was one of the factors blamed by K P Turnquest, deputy prime minister, for the predicted $185m revenue shortfall faced by the Government.

The unit was supposed to generate $80m of that figure, and its work has assumed extra importance following this week’s indication that the 2018-2019 revenue shortfall is likely to be even greater than the amount projected by Mr Turnquest in the mid-year Budget.

Mr Johnson yesterday admitted that recruitment for the REU had “taken a little longer than we’d have liked”. He added: “We’re finalising the recruitment of collection agents on certain elements, and working with the Customs Department on matters related to that area....

“It’s a mix of new staff as well as persons from the public service there already. Included in that is the recruitment of tax auditors. We feel very excited about the kind of talent brought to the team, both from within the public service and outside.”

Mr Johnson said personnel sourced from outside the public service were mainly accountants needed to do VAT and other audit work, while Customs Department personnel with investigative skills will also be involved in the mix.

“When the audit team comes on stream, we believe there’s substantial under-reporting of VAT and opportunities to improve compliance there,” he told Tribune Business. “We’ll certainly be doing audits on Business Licences, and see how they compare to VAT submissions and peers from the same industry.

“We’ll be looking at the Family Islands. In some areas there’s been rapid development, so new and expanded businesses are popping up. We’ll be paying attention to those. We have sufficient intelligence to suggest there’s substantial opportunities to improve Customs and Excise collection.

“Certainly, from the revenue standpoint the consistent narrative ongoing for decades is there’s substantial opportunity to increase collections in a number of areas,” Mr Johnson added. “As mandated by the deputy prime minister and Cabinet, we’re compelled to push ahead on areas of concern, take a disciplined and structure approach.

“It’s an area of tremendous opportunity in a number of ways for the Ministry of Finance. We’re starting in May, and the benefits may be higher than what we’re projecting now.”

The Minnis administration has been heavily criticised by its political Opposition for disbanding, and failing to continue, with the Revenue Enhancement Unit that its PLP predecessor set-up to target the same tax and revenue streams following Hurricane Matthew in October 2016.

Moody’s, the international credit rating agency, revealed in a mid-summer 2017 report that the Christie administration’s unit had yielded some $90m in revenues during its first six months in existence, putting it on target to generate $180m in extra annual income for the Public Treasury.

Its successor, though, argued that the Christie administration had failed to provide the unit with any legal basis for its activities. It also argued that it was staffed by foreign accountants, with few to no Bahamians, and no training programme to enable them to take over.

“It’s here, starting in earnest, and we feel good about where we’re heading and where the process is,” Mr Johnson added. “Now the unit has the backing of law and a Cabinet mandate, we feel it will bear fruit once we start getting into it.”

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