By NEIL HARTNELL
Tribune Business Editor
The Ministry of Finance's top official says the first approvals for companies qualifying for the government's $60m tax credit/deferral relief initiative should be issued this week.
Marlon Johnson, the acting financial secretary, told Tribune Business that the application form and related link had "gone live" from last week Thursday with the Department of Inland Revenue (DIR) establishing a dedicated team to review and approve business submissions.
He voiced optimism that the initiative, which is effectively a payroll support programme intended to keep up to 10,000 workers off the National Insurance Board (NIB) lines, will provide medium-sized Bahamian businesses with sufficient "breathing room to keep going" during the nationwide shutdown and re-open on the other side.
"The Department of Inland Revenue has put together a dedicated team to review applications, and I'm sure they'll have started to look at them over the weekend," Mr Johnson said. "They will start to get the approvals out early this week. They have the information on the companies, and that process should be straightforward and we will do our best to make it so.
"The purpose of this is to give businesses some breathing room to get through this period. As we get past this shut down period and open up the economy, it will give them some room to open. Hopefully it provides some headroom for medium-sized businesses to keep going."
While acknowledging that The Bahamas' major sector, tourism, will likely be closed for some time due to the COVID-19 pandemic's impact on global travel and major source markets in the US, Mr Johnson said there were companies within the economy's domestic sector that stood to benefit from the initiative.
The full details of the tax credit/deferral initiative, which were released on the Department of Inland Revenue's website, reveal that qualifying companies must commit to retaining at least 80 percent of their non-executive staff as at end-February 2020 through to October this year.
Some companies may consider such an eight-month timeframe too long given the uncertainties surrounding COVID-19 and the associated lockdown, and the combination of tax credits and deferrals can only be used to cover non-executive payroll.
Those firms applying must have a minimum $3m in annual sales and at least 25 employees, and be in "good standing" with VAT payments at end-February 2020. The same applies to all business licence fee payments prior to 2020, with this year excluded from the "good standing" calculation.
Banking information must be supplied as evidence to support non-management payroll costs that have to be broken down into the different employees categories, with proof of National Insurance Board (NB) contributions required.
The three-month initiative will provide qualifying firms with up to a maximum of $600,000 split equally between a combination of tax credits and deferrals. Those companies with outstanding business licence fee payments and VAT receipts will be able to withhold payment and, in return, receive a maximum of $200,000 per month.
Some $100,000, or 50 percent, will come in the form of a non-reimbursable tax credit. And the other $100,000 will be "deferred" until January 2021, when it will have to be repaid in a series of 12 monthly instalments throughout the year.
"If the payroll cost is greater than $200,000 in any given month within the qualifying period, the ATR (approved tax relief) provided will not exceed $200,000 for that month to a maximum of $600,00 over the qualifying period," the Department of Inland Revenue said.
"If the payroll cost is less than $200,000 per month within the qualifying period, the approved tax relief will be equivalent to the payroll cost." The tax relief offered will be first applied against any outstanding business licence fees, and any excess then applied to VAT that is due.
Should a business be current with its Business Licence, but owing VAT, then the full tax relief will be applied against the latter tax. "The taxpayer will conduct business in the usual manner and withhold VAT payable (output VAT less Input VAT) to the extent of the available credit," the Department of Inland Revenue added.
"In rare cases where a taxpayer might find themselves in a receivable position, the amount so available will be utilised against future tax liability but will not be available as a cash refund."
The Department of Inland Revenue promised to acknowledge receipt of all applications within 24 hours, and advise of both approvals and the amount of tax relief being provided within 48 hours of all supporting documents being provided.
But the private sector, while praising the tax credit/deferral initiative as a wonderful effort to assist companies during the COVID-19 pandemic, argued that the economy needed to be opened up to allow businesses to earn some revenue for it to be fully effective.
It also pointed out that the payroll-focused effort does not address other fixed costs and overheads that companies still have to meet, and pay VAT on, such as rent, utilities and bank debt.