The new value-added tax (VAT) regime proposed by the government would allow the state to impose widespread penalties on those who fail to comply with the new act and its regulations, including heavy fines, shutting businesses down, publicly naming and shaming, seizure of goods and auctioning off of assets and even jail time.
The new regime would also allow the Central Revenue Agency (CRA), which the government is setting up to regulate and collect VAT, to demand details of assets from banking institutions, garnish money owed to registrants by others and restrict access to travel for those who owe outstanding taxes.
The draft Value Added Tax Bill 2013 and Value Added Tax Regulations 2013 obtained by The Nassau Guardian outline dozens of instances that a VAT officer or the VAT commissioner might view as offensive to the act. The nature of these offenses would fall under the categories of minor, serious or very serious.
Individuals and companies are subject to fines by the CRA. However, the fines for companies in the draft legislation are much more serious.
For a minor infraction, an individual would be fined $12,500.
A minor infraction by a company would carry a fine of $25,000.
A serious infraction by an individual would carry a fine of $25,000.
A company would pay a fine of $75,000 for a serious infraction.
A very serious infraction would carry a penalty of $50,000 for an individual.
A company would have to pay a fine of $150,000 for a very serious infraction.
Contravention of the act could also land a violator in the proposed Revenue Court, where a fine of up to $50,000, a prison sentence of up to two years, or both, can be handed down for a variety of offenses.
The rules apply to VAT registrants, those who perform professional services, importers and even VAT officers.
As far as fines go, of the listed infractions in the draft regulations, 34 of them are listed as very serious, 18 are listed as serious and nine are listed as minor.
Some of the minor infractions include a registrant failing to display the price of an item exclusive of value added tax, and failing to display a valid certificate of registration in a conspicuous place in the location of taxable activity.
Serious offenses range from failing to properly fill out an import declaration form in the proper manner to interfering with the VAT commissioner in the exercise of his powers.
Very serious infractions include failure to give the VAT commissioner or VAT officer reasonable assistance or to answer questions; a bank or financial institution failing to comply with a request made by the VAT commissioner in writing; a promoter allowing public entertainment to take place without having paid the amount of security requested or without having received the approval of the VAT commissioner in writing, and failure to keep reliable accounting records in English in relation to taxable transactions or failing to keep such records for a period of seven years.
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The Central Revenue Agency will also be able to issue notices for access to premises allowing VAT officers to conduct audits or inspections. The CRA would also be allowed to take possession of a business' books, documents or computer records for further examination.
The CRA would also be able to issue notices to third parties, including contacting a registrant's bank or receivers to demand details about an individual's assets.
The CRA would also be empowered to garnish money held by third parties.
It would be able to seize goods, vehicles and other assets where it is proven that VAT due was not paid on the goods in question. Those goods seized may be sold to cover VAT due.
According to the legislation, proceeds from seizure and auctioning of assets will be used for any other related cost involved in process of seizure and the recovery of delinquent taxes.
Goods for auction include property and other assets not exempt by law. The CRA can also publish the names of non-compliant taxpayers in the newspapers. The VAT commissioner may also recover unpaid tax by distress proceedings.
Delinquent taxpayers can also be restricted from travel until outstanding taxes are settled.
The CRA would also be able to temporarily close businesses of non-compliant taxpayers for refusal to pay taxes due.
Financial Secretary John Rolle recently told The Nassau Guardian that a strict regime would have to be put in place to avoid VAT fraud and corruption.
"First you have to have the system to detect and the right controls," Rolle said. "And second, you make sure that the punishment is severe enough to be a deterrent.
"If there is someone who is an employee of the government and they are discovered to be corrupt, they can face fines of up to $100,000 depending on the severity of their transgression, plus imprisonment.
"That is going to be a part of this, making sure that punishment for going astray or being corrupt is severe and the punishment is given out."
The Ministry of Finance is setting up the CRA, which will be chiefly responsible for the collection of VAT, along with the Department of Customs.
Rolle estimates that the agency will need 150 people to run effectively.
He said the customs officers will collect VAT at the borders when non-exempt goods are imported. Business owners will be obligated to pay VAT to the Central Revenue Agency once they provide a service or sell goods.
Rolle said the Ministry of Finance will conduct spot checks, or audits, if there is reason to suspect that some businesses are trying to evade paying taxes.
The government plans to roll out VAT on July 1, 2014 at a rate of 15 percent in the wide majority of cases.

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