License reforms remove cost of sales 'nightmare'

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July 26, 2010

Both the current and immediate past Bahamas Chamber of Commerce presidents yesterday praised the Government for simplifying the way business license fees were calculated, telling Tribune Business the revised Bill would eliminate the complexity and "abuse" associated with gross profit calculations, while maintaining food retailers should have been given a special category.

Khaalis Rolle, the Chamber's current president, said many Bahamian businesses had to endure "a nightmare" in working out their cost of sales in order to calculate gross profit, something he suggested had created room for abuse in an effort to minimize fees payable to the Government.

"I believe it is a reasonable statement of affairs, and is certainly an improvement on the old Bill and legislation," Mr Rolle told Tribune Business, adding that many companies had "struggled with what constitutes cost of sales". This, he said, had allowed "for discretionary decision-making" on this issue.

"The only thing we may have been suggesting differently than what is there is treating the grocery stores and wholesalers a little differently," the Chamber president said. "Their turnover is very high, but their profitability is low, so some special consideration should have been given to reduce that burden on them.

"That's what I was planning on discussing with the Minister [Zhivargo Laing], but the Government was obviously in a rush to get this done, and we had not completed our canvassing."

Mr Rolle was backed by immediate past Chamber president, Dionisio D'Aguilar, who is also chairman of AML Foods, the Solomon's SuperCentre and Cost Right owner.

"Food stores are very high volume and make low net income," Mr D'Aguilar told Tribune Business. "They were paying, as a proportion of their net income, a very high business license fee."

Using the example of a grocery chain generating $100 million per annum in sales (not dissimilar to AML Foods), Mr D'Aguilar explained that if it was generating gross profits of $4 million per annum, it would end up paying a $1 million business license fee.

Subtracting this from the gross profit would leave the company with $3 million, and the AML Foods chair and Superwash president said such a company would be effectively be paying "25 per cent of its net income in business license fees".

"Food stores should have been in a special category," Mr D'Aguilar agreed, "for a number of reasons. They contribute a lot to the Treasury, because they import a lot. Second, they are very large employers. Third, they use a lot of real estate and contribute property taxes.

"They contribute a lot to the Treasury in import duties, business license fees, property taxes and National Insurance contributions."

The Government appears to have made several key changes to the original Bill, with attorneys, accountants and doctors among those most likely to be aggrieved by the version tabled in Parliament.

While no mention was made initially about including them in a special category, those professions, along with architects, engineers and "other similar or like professions" will have to pay an annual Business License fee equivalent to 1 per cent of turnover.

The Government has maintained at a flat rate $100 the annual business license fee for new businesses and small firms ('Mom and 'Pop' businesses) with an annual turnover of less than $50,000, and kept all firms involved in agricultural and animal husbandry/mixed farming; fishing/fish farms; and food/meat/fruit processing in a special category where they pay a fee equivalent to 0.5 per cent of annual turnover.

Click here to read more at The Tribune

News date : 07/26/2010    Category : Business

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