Value added tax (VAT) and Debt Collection

 

Debt Collection Expert Speaks Out Regarding VAT and Debt Collection

 

 

Rory Higgs

There has been a lot of talk throughout the Bahamas recently regarding the implementation of VAT and the collection of taxes. While for the most part the talk and views expressed are from respected individuals who are experts in their respective fields, none of the persons can claim to be experts in the field of “debt collection” in general or “debt collection in the Bahamas” in particular.

Apex Management Services has been in business for over 15 years and is the only debt collection agency in the Bahamas that is capable of handling the full spectrum of debt collection with state of the art technology and resources that are all under one roof.

While there are several debt collection options that include; In-house Collectors, Internal or External Attorneys, Internal Call Centers, External Call Centers and Offshore Call Centers, none of the options are as efficient and effective as a Local Full-Fledged Debt Collection Agency, which can handle matters from start to finish without gaps. 

Some of the inherent flaws that are associated with the various collection options that often substitute for Debt Collection Agencies are as follows:

Internal Attorneys at best would function similar to an external attorney with the difference being that they would be more accessible. At worst an Internal Attorney would also have a focus on other duties, which would diminish the attorney’s role as a specialist with 100% focus on debt collection. Although Day Court is an option, as a matter of convenience, many civil matters, which fall in the Magistrate Courts jurisdiction, are heard in evening court, which would often necessitate odd hour for an internal attorney.

External Attorneys do not operate debt collection agencies; in many instances their main focus is to obtain judgment with little if any interaction with the debtor. Prior to obtaining judgment and after judgment is obtained; attorneys do not have the capacity to provide the care and attention to each and every individual account. In most cases attorneys will bill the client after judgment is obtained and the client is still left to collect the amount of the claim.  Many matters handed to attorneys go uncollected long after the attorneys have been paid.

Onshore Call Centers are on the opposite end of the spectrum from Attorneys, in the debt collection process. While Onshore Call centers are extremely good at interacting with debtors, they have no enforcement capabilities. If a call center operator is dealing with a debtor who is not cooperating or refuses to pay, the call center has no recourse but to send the debt back to the client who will most likely send it to an attorney thus creating a time and process gap, when time is of the essence.

Furthermore Call Centers have no capabilities to locate debtors whose whereabouts are unknown (Skip Trace) even though a large percentage of bad debt matters require Skip Tracing. At best, Call Centers are only suitable for early stage debt not late stage debt.

Offshore Call Centers have the same disadvantages as Onshore Call Centers plus the following added disadvantages.

Communication and Culture - In most cases Offshore Call Centers operate in countries where there are cultural differences that are often subtle but significant. This is compounded when English is not the native language or where patois is predominant.

Geography – Psychologically if a debtor senses that there is some significant distance between the call center operator and themselves they are less likely to cooperate or pay.

Speaking from experience gained working with a major commercial bank that implemented an offshore call center option that failed miserably, Offshore call centers or Offshore Collection Agencies do not work.

The differences that a properly equipped and professional Debt Collection Agency such as Apex makes to the collection process that none of the above options can provide are as follows:

•          Principal has over 30 years of Credit and Collection Experience.

•          Principal is an accomplished Fellow and Member of the largest International Debt Collection Trade Association. ACA International, the Association of Credit and Collection Professionals.

•          Agency has been in operation for over 15 years

•          Easily accessible well-maintained and spacious offices conducive for customer service.

•          Adequate telecommunication technology and operators to handle thousands of calls daily.

•         Auto-dialers, which exponentially increase the calling and communication capacity of the call center.

•         SMS technology which exponentially increases the communication capacity of the call center.

•          State of the art Collection Management Software capable of handling unlimited number of accounts with integrated financial accounting, diary management and many additional features.

•          State of the art Legal Case Management Software

•          24/7 client web access

•          Skip Tracing Database and Skip Trace Network

•          In House Attorneys that are 100% dedicated to debt-collection-litigation.

“International financial institutions, such as the World Bank and International Monetary Fund (IMF), have propagated a conventional wisdom that revenue collection authorities are more effective when they operate autonomously from the state, as a commercialized entity at arms length from government rather than as a department within the government administration”.  (Source: Preconditions for Effective Tax Collection, By – Economic Policy Research Unit, Bergen Norway)

A growing number of U.S. states are expanding their relationships with private collection agencies to settle long-overdue taxes.

Her Majesty Revenue & Collection (HMRC) has outsourced some of its debt collection to external agents. Following a pilot, a notice entitled ‘Modernizing debt collection’ was released explaining that four debt collection agencies will be employed by HMRC to collect an outstanding £140 million of outstanding tax debt. (Source: HMRC sends in debt collectors for unpaid taxes. By-Nick Lodge, Director of debt management and banking HMRC.)

In Spain alone more than 800 companies specialize in collection of outstanding debt, handling a total of 71 billion euro and generating close to 560 million euro for their business. (Source: DBK, “Empresas de Gestion de Impagados)

With an obvious eye on an opportunity to capitalize on the existing situation, a number of over-night debt collection vendors are beginning to surface without any experience or capacity to perform at a level that would be required.

It would be a shame if we as a country succumb to the temptation to award debt collection contracts based on patronage rather than on merit, at such a time when our country’s financial wellbeing is at stake.

March 28, 2014

Media Contact: Rory Higgs  
Phone: 424-0985 (Cell)

Email: rhiggs@apexbahamas.com

 

Bahamian Shanendon E. Cartwright ...encourages all Bahamians to actively participate in the continuous positive advancement and further greatness of our beloved Commonwealth of The Bahamas

Want real change in The Bahamas? It’s time for active citizenship



Shanendon Eugene Cartwright

On July 10, 2013, the Commonwealth of The Bahamas celebrated 40 years of independence.

The annual recognition of self-determination inherently gave way to a national reflection on self-evaluation and an assessment of how far we have come as a nation and what is the way forward for the next 40 years.

An objective, fair and realistic evaluation would render a judgment incredibly favorable to the Commonwealth of The Bahamas. As the adage goes, “To whom much is given, much is expected.”

We, the Bahamian people, have been given a great country by our God, our forefathers and Bahamians of generations past. The expectation now even more than ever is for every Bahamian citizen, every one of us, to make individual contributions to the continuous advancement and further greatness of our beloved commonwealth.

As we embark upon the next 40 years, all of us must embrace an active citizenship, one that asks: “How does my attitude, my lifestyle and my behavior either contribute to the increasing development or gradual weakening of the Commonwealth of The Bahamas?”

An active citizenship that says to be born Bahamian is not a right, but a privilege, a privilege that must be honored by an equal and unshakeable resolve to “do my part” to make The Bahamas better.

Occasionally lost sometimes in the usual rhetorical scuffle and paralysis of analysis that at times handicaps the national dialogue on pertinent issues is a fundamental and undeniable fact that history has been a witness to time and time again. When real change and transformation altered the Bahamian national landscape in the Commonwealth of The Bahamas, it was an active citizenship that served as a catalyst.

From the Burma Road Riot in 1942, to the taxi cab blockade in 1958, to the historic vote of Bahamian women in 1962, to Bahamian independence in 1973, to the formation of both the Free National Movement and the Progressive Liberal Party, these historic events have been shaped by ordinary Bahamian men and women with extraordinary passion, resolve and selfless love of country.

Admirably, we have become a very vocal and critically thinking citizenry, but the ongoing sense of entitlement, over-reliance and excessive dependency on government have in many ways reduced the incentive for some Bahamians to be involved in their own development.

There must be a collective commitment to change the status quo and create a country for active citizenship to flourish. We must foster a culture that rejects the idea that political access to the Public Treasury is either the only way or the primary way for economic empowerment to occur. Governments ought to not simply act on behalf of the Bahamian people. They should act with them and create an environment ripe for economic independence and empowerment.

So while I do concede that social services agencies and programs are necessary to act as a collective safety net for our brothers and sisters who are ill-equipped and less fortunate, they cannot be embraced as a sustainable method through which we empower. We the citizens must be engaged sufficiently that we ensure that political, business, civic and religious leaders are accountable for their actions as we have to be accountable for ours. We must work with other community stakeholders to forward development, provide serious long-term solutions for our social, economic and educational ills.

Each of us should champion the concerns for those who have no voice and those whose influence is limited by virtue of education or economics. An active citizenship and social agitation is the bedrock of any mature democracy and it must be dynamic, visible and vibrant. Let me submit this, that our desires for our country are directly connected to what we are willing to give it individually. Now let me register this admission for the record. There are thousands of great Bahamians who helped to build this country and there are countless others who make their contribution to their community and this nation everyday. Yet, there still remains a sizeable portion of the population who sit on the sidelines; people who spectate not participate. Simply put “the work is plentiful in our country and the laborers are few”.

Self-advancement

We must embrace the notion that each of our roles is significantly important to the transformation of our country. Whether you are the right honorable prime minister or a painter, an engineer or an evangelist, a taxi driver or a janitor. We must all lead from where we stand and alter our surroundings for the good of The Bahamas. It is my belief that we must weave into our social fabric a sense of a “through the corner”, “in the yard”, “everyday” patriotism. An ever-present patriotism that will stir the soul of the Bahamian people daily and incite a level of pro-activeness and a relentless focus on nation building. I’m reminded daily of the impact of this when I talk to and observe a remarkable lady on the corner of Meadows and West Streets affectionately known as “Mother Blessed” as she cares for and transforms the lives of young children in the Bain Town community. I’m reminded of this when I drive on Baillou Hill Road and see Troy Clarke of the L.E.A.D institute as he inspires the young men in his program. I am reminded of this when I think of Tyrone ‘Goose’ Curry of the Foundation Junkanoo group, who works tirelessly to uplift the spirits of the young men and women in the Chippingham area.

There is, however, a stark and festering reality that has been with us for decades that seems to evade our consciousness and that is there is no amount of legislated public policy that can stem the instances of chronic lawlessness, social deterioration and corruption that we are now facing. To begin to usher in the change needed it will involve an active citizenship and an engaged, aggressive, demanding Bahamian citizenry whose members work tirelessly within their circles of influence to begin to eliminate and battle those elements of our society that weaken us as a country.

We have much to be proud of as a country and are truly blessed for having been given the Commonwealth of The Bahamas by our creator. We are therefore both citizens and caretakers. Let us remind ourselves daily that citizenship is not simply a status of national residence. It is an unwritten, sacred, solemn and binding pact between us and our country. We are exposed to unlimited privileges of being Bahamian; the absolute advantages of our climate; our geography, our seas. We benefit from a sometimes, yes, challenged but underestimated thriving democracy and a stable economy. We are in the elite and enviable position of being one of six countries in the world that have United States pre-clearance. We enjoy the relatively peaceful and tranquil experience that is the Bahamian way of life. All that is asked of us is to do our part and make individual and collective contributions to our Bahamaland that has given us so much. We reap the harvest from our land but in my humble view too many are unwilling to till the soil for the next generation just as the land was prepared for them.

There is no more room for idle hands or the absentee citizen. For the very same community and society we neglect today are the same ones we will become victims of tomorrow. We must awaken those patriotic passions and cultural ideals that were so prevalent during the pre-independence years and those immediately after. There must be a huge shift in how we view our citizenship. Let us harness that unique Bahamian spirit of excellence that has given us world-class leaders, scholars, actors, painters, song writers, musicians and athletes and become consumed by what will make us individually better neighbors, ideally better Bahamian citizens, because the future of the Commonwealth of The Bahamas depends on it.

• Shanendon E. Cartwright is the founder and facilitator of Vision 21 – an educational, motivational and interactive lecture series on leadership.

March 28, 2014

thenassauguardian

A Bahamian perspective on the “Bahamian” design of value added tax (VAT) and its compliance in The Bahamas

Changing the conversation: Assessing VAT and the nation’s fiscal crisis

Anyone watching the news or reading the newspapers in the past few months would have heard some elements of the government’s planned implementation of value-added tax (VAT). The private sector has mounted opposition to the introduction of VAT and some have raised concerns whether VAT is the best taxation regime to wrestle the gloomy state of the national finances. It should be stated at the outset that VAT is widely employed and recognized in many developed countries as an appropriate model for modern tax collection.

With the publication of the white paper and the value-added tax bill, there is no doubt that the introduction of VAT is a major and radical policy shift in our post-independence fiscal management. If introduced, it will amount to the alteration of an archaic taxation regime that has been in place from the colonial days. It too will have the distinction of modernizing our approach to taxation matters and hopefully will signal a new paradigm in the collection and allocation of the state’s finances. The planned introduction of VAT has major consequences for The Bahamas and therefore it is vitally critical for members of the public to be informed and engaged in the consultative process. Given these realities, it is imperative for the public dialogue to be analytical, informative and frank.

VAT is generally considered a complex and robust tax. Although VAT is not the most progressive of taxation methods, it is viewed as having vast benefits in a multi-tax regime principally because it is a consumption tax. VAT is similar to retail (or sales) tax but is collected in smaller increments throughout the production or service delivery process. Its method of collection does not allow the “full” tax to be paid by the final consumer. The tax is collected by all entities providing taxable goods and services and is imposed on sales to all purchasers. It allows for a set-off of a business’ VAT liability from that of the amount paid for the purchase of the goods and services delivered to the consumer. It has a net-like-effect in the calculation of the total VAT liability owed to the government.

There is need for further explanation and discussion as to whether the “Bahamian” design of VAT will be based on a broad consumption base by an inclusion of all forms of government services. There must also be further consideration to whether there will be neutrality between public and private sector provision of goods and services. Additionally, deliberation must also be given to whether VAT will employ a credit-invoice method and if there is value in the imposition of the intended multi-rate as opposed to a single uniform rate. There has not been sufficient discussion about the increased administrative burden it will place on businesses and the government and whether the rate(s) will be high enough to raise sufficient revenue to accomplish the tax reform measures. These are weighty matters that require broad consultation and public education so that the implementation is progressive and seamless.

Further, special consideration must be given to small businesses and those entities which carry out non-commercial services in light of the added costs associated with VAT compliance. At present, the definitions of “business” and “taxable activity” in the bill are broad enough to include some charitable and religious services and possibly certain non-commercial government services. Although the bill exempts services relating to religious and charitable functions, all ancillary services may not be exempt. This was the experience in the United Kingdom (for example) where children’s clothing had a zero rate VAT but some items in that category were still not exempt (i.e., a basic T-shirt versus one with embellishments).

It is interesting that the bill seeks to create a distinction in the taxes collected from goods and services for local and international consumption. This approach questions whether our present economic model justifies such a division given the limited taxpayer base. We also must examine whether there is any merit in retaining the payment of license fees in the port area in Grand Bahama under the Hawksbill Creek Agreement if VAT is to create a broad base tax regime. Emphasis must also be directed at ensuring that poor Bahamians are not unduly saddled with a greater taxation burden. In this regard, the bill provides exempt status for certain basic food items and services. The question is whether the identified exempted goods are adequate to provide the required protection for the poor and marginalized. It must be noted that some critical services are not subject to zero exemption, albeit they are heavily utilized by the poor.

There are clear advantages if VAT’s application is broad based and levied as a single rate. It should stimulate economic efficiency and can also increase consumers’ choice. It can also have the effect of allowing consumers to properly and wisely allocate resources in a democratic fashion.

The rationale for the exemption of financial services and international transactions requires further public explanation. The intent may have been to blindly continue the decades’ old “protectionism” of foreign banks and financial service providers. For local banks and financial services providers that are majority owned by Bahamians who cater to a predominant foreign clientele, no exemption should apply. Similarly, foreign banks and financial institutions, whose shareholders are predominantly non-Bahamians and whose control is outside the geographical waters of The Bahamas, should not enjoy exempt status. These matters should be further reviewed within the context of whether VAT will be a barrier to the further expansion of the Bahamian financial services sector and the overall economic growth across all sectors.

It must also be recognized that unlike other nations that have employed VAT, the national conversation is not centered on the introduction of VAT in conjunction with the harmonization of income or capital gains taxes. This means that our approach should be fundamentally different to that of the United Kingdom and New Zealand (and other OECD countries). The primary focus should be to attain the greatest potential for overall revenue generation by taxing goods and services enjoyed by all consumers, particularly those who may repatriate savings and profits to onshore or other offshore jurisdictions without the payment of taxes under the present structure.

Our present taxation regime is unitary and based on fixed rates for business licenses and customs duties. Even within this simple system of taxation, noncompliance is remarkably high. It is also true that no matter the taxation method or model, tax evasion is inevitable. In the U.S.A., income tax evasion is projected at between 18-20 percent. It is possible that in The Bahamas the rate of tax evasion is at the higher threshold of 40 percent for customs duties, real property tax and business licenses. The government hopefully has built into its revenue projections and analysis a reasonable percentage for tax evasion, as VAT will not likely put an end to the culture of tax noncompliance. In fact, it may be arguable that tax evasion may be simplified and enlarged with the introduction of VAT, as it may lend to counterfeit inputs and “ghost” transactions. The United Kingdom pegs its tax evasion for VAT to around 13 percent and in OECD countries it is around 18 percent on average. The experience of the developed economies is that VAT is more prone to evasion when more categories of goods and services are excluded and multiple rates are utilized. There are other valuable experiences and lessons that we must take stock of and seek to find creative ways to eliminate in the Bahamian roll-out of VAT.

Government spending and tax collection

Thus far the debate on the new tax has placed too little emphasis on the relationship between VAT and the growth of government spending. Assuming that the government is able to raise more revenue with VAT it must not be a panacea for an exponential increase in government spending and the expansion of government noncommercial services. The fact that there is a need for a more modern approach to taxation demands that the government similarly create a legislative frame that ties government spending to the total amount of taxes actually collected in any fiscal period. There must be dual responsibility and accountability on the taxpayer and the government in the collection, allocation and spending of the tax dollars.

Bahamians fully understand that the government requires a broader tax regime to meet the growing demands of the society. Bahamians are also in tune with the culture of non-tax compliance, which is across all economic classes. Thus far the debate is glaringly and intellectually hypocritical by the failure or refusal to discuss all of the other available options for tax-credit expansion. There is a need therefore for the policymakers to engage in a larger purposeful discussion about taxation (period) and the best measures to increase taxes, albeit in a grueling recession. The debate must also focus on the “new” measures and methods that must be introduced to improve tax collection. There is no denying that presently the government is doing a lousy job in collecting real property tax and in the assessment and collection of customs duties and business license fees. Just as the present system allows for tax evasion, one hopes that the culture of a few paying the tax bill will not remain a staple of our fiscal discipline and management.

Governments are elected to lead. But they are also elected to govern responsibly, sensibly and fairly. There is no fairness in a taxation model that will drive people into poverty and create a further burden on those who are not able to meet the basic needs of human existence. The Bahamian people are duty bound to reject any taxation regime that favors over-taxing the poor or that creates a windfall for those who can afford to pay more.

The honorable prime minister was correct when he suggested that the government should slow down the process. At present there remains too many unanswered questions, and too many other viable options that require public explanation as to why they cannot be employed to fix the nation’s fiscal crisis. It is therefore incumbent on the government to change the conversation and to review all options, inclusive of a payroll tax, to assess and determine if there are other robust models which can be implemented to assist in the expansion of the tax base. The government must also lead by example and must demonstrate to the public that it recognizes that it must reduce waste, foolish and extravagant expenditure and poor fiscal planning. It can lead by recognizing the constitutional provisions on the size of Cabinet and by creating a more lean, responsive and progressive public sector.

There is much merit in a simple and easy to understand taxation regime that better aids in tax compliance.

The government should revisit its overall taxation strategy and devise a plan that fits well within the nation’s future needs and achieves our international competitiveness. The fact is that there can be no new taxation regime without an engaging public dialogue. Leadership on these matters demands a pragmatic approach to the nation’s daunting fiscal challenges and the full engagement of the Bahamian people. The process must be transparent, intellectual in its analyses and focused on improving the quality of the tax product (VAT or a viable alternative).

• Raynard Rigby is an attorney and former chairman of the Progressive Liberal Party.

March 26, 2014

thenassauguardian

Scotiabank Bahamas shabby and insulting service

 An open letter to the Managing Director of Scotiabank Bahamas

Dear Sir or Madame: 

I was awfully disappointed in your service at your Bay street Branch today, where I was harassed and denied great care by your security officer at the door and a young male customer service representative; who insisted that I will only be served if I took my hat off.

I have also executed transactions at the Royal Bank Bay Street Branch and Bank of The Bahamas on Shirley Street today, and I was given outstanding service and care by the good staff at those two banks - with my hat on.

I thought banking was your business, but it looks like Scotiabank Bahamas is more occupied with the discrimination of certain customers rather than good old banking.  A policeman entered your Bank while I was being treated like an idiot and second class citizen.  I asked the security if he will be telling the police officer to take his hat off too.  He replied: “You ask him”.

The security officer then went to the counter to instruct the customer service reps to not serve me if I still had my hat on.  When it was my time to be served, I ended-up at a wicket with a beautiful and friendly lady employee who apparently did not get the message to not serve the hat-wearing me; then, the young male customer service rep joined her, and halted the transaction!  I then took my hat off momentarily as I really did not have time to be wasting in Scotiabank with foolishness. 

 

The transaction proceeded and I put my hat back on.  The young male employee then told me that he would like to talk with me afterwards; so, he proceeded to the lobby area to wait on me to complete my transaction.

I had no time to waste with the young lad, but I whispered to him while proceeding to the exit, that the big bank robbers are the employees themselves.  Go and make sure that Scotiabank Bahamas money is safe from the crooks that might be operating big-time within.

Your no hat policy is stupid and runs contrary to what you are open for; and that’s banking business and quality customer service.  The next time I experience such shabby and insulting service from Scotiabank Bahamas, I will seek legal advice.  I want to hit Scotiabank Bahamas where it hurts the most; in your pocket.  It’s the only way that you guys will straighten-up and fly right!

Dennis Dames

March 27, 2014