Duty relief on VAT equipment
Guardian Business Reporter
Published: Oct 02, 2013
Small businesses can expect financial relief in covering the costs of transitioning to VAT, as the government intends to provide duty concessions on equipment that may need to be acquired to aid compliance, the minister of state for finance has stated.
Michael Halkitis said that the government is committed to helping small businesses make a smooth transition to the value added tax (VAT) system as it continues to gather the resources needed to ensure the country is financially stable.
Meanwhile, the minister has suggested that VAT presents an “opportunity” for businesses to greatly improve on their record collection habits.
Halkitis made these comments during an address at the official opening of Scotiabank’s Small Business Week at the British Colonial Hilton on Monday evening.
In his address to an audience of small business operators, Halkitis said that it is important that small businesses are able to thrive within an environment that encourages their success at every level.
He noted that in order to assess the impact of VAT on small businesses, Bahamians must first understand how businesses will need to adapt in order to accommodate the tax.
“Firstly, under the new tax system, businesses will be required to adapt their accounting and IT systems to monitor VAT liabilities.
“Secondly, all businesses will be required to file monthly VAT returns to the government. Thirdly, it will be vital that businesses keep good records to justify credits claims. Finally, all registered businesses must issue VAT receipts.”
Halkitis said the government has taken steps to ensure that small businesses are not “unfairly” required to bear the compliance cost associated with VAT, if they are legitimately unable to do so.
By setting a threshold of $100,000 in annual revenue as the point at which a business should be required to register for VAT participation, Halkitis said this would allow those for whom compliance may be too costly” to opt out of VAT participation.
“(This will protect) the smallest and most vulnerable firms in our economy from becoming overwhelmed,” Halkitis explained.
For those small businesses who do become VAT registrants, Halkitis said that given that VAT is not intended to be an “unbearable burden to the small business community” in The Bahamas, the Government is committed to working with the private sector by providing education and training in order to ensure that smaller registrants can indeed comply with the record keeping and other VAT requirements.
One-on-one training sessions will be made available.
However Halkitis stressed that a commitment to record-keeping will become critical for small businesses engaging in the VAT system.
“It is well known that a substantial number of businesses keep no formal or structured financial records. The introduction of the VAT presents an opportunity for that to be greatly improved.
“By providing a clear incentive for businesses to keep detailed financial records, the introduction of the VAT will go a long way to raising the standards of the accounting practices carried out by small businesses in The Bahamas,” he said.
According to Halkitis, the government is also proposing to assist small businesses with duty concessions on equipment that will be needed for VAT compliance; in an effort to further decrease the compliance cost for small businesses.
Noting that the country is at a point where “critical action” must be taken to ensure future economic stability, Halkitis said that the Government would not wish this to lead to small businesses being asked to shoulder a burden that they cannot bear.
“The Government is committed to working closely with small businesses in all areas of our economy to ensure that the transition to VAT is a smooth one,” he said.
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