The 2018 Atlantic Hurricane Season is fast approaching and is predicted to be more active than normal. 

Value Added Tax (VAT) on insurance claims is worrisome for Chartered Accountant, Kevin D. Seymour who  said  this must be addressed ahead of the hurricane season. 

“The fact that we had a very active storm over the past years, now coupled with a VAT being included in your claim, is going to very well put insurance out of the reach of many people. 

“And that is something the government needs to think carefully about because at the end of the day, if someone is unable to afford insurance and there is damage to their property, who bails them out…the government,” Seymour said.

The Value Added Tax Amendment Act 2015 stipulates that if you receive an insurance claim, the government’s VAT is imputed in the amount that you receive, but Mr. Seymour said this is a well-kept secret. 

“I only say that from the perspective of being notified that that is the case because obviously, what that does is, it shifts a burden on to the tax payer, to ensure that the government has paid your money and if you receive something and you don’t know you owe somebody something, you can get into serious trouble in terms of penalties, interests, and the like,” the accountant said.

He noted that while the issue has been discussed between the insurance industry and the government, there has been no resolution. 

“My research suggests that this issue is one that has been discussed with the insurance industry by this government and successive governments, and they were looking to have some resolution to it; but of late, certainly here in Grand Bahama, we would have seen evidence where the VAT department is quite aggressively pursuing tax payers and telling them that they owe the government these funds,” he said.

“And many of them unfortunately were not aware of it and it is a situation that needs to be addressed, and addressed urgently because we are about to go into another hurricane season and there are a number of issues associated with this.” 

“If you have to pay a VAT from the claim proceeds you receive,  essentially what that means is the cost of your insurance has just gone up, without you understanding that it went up,” he said. 

Seymour’s suggestion is to repeal the VAT Amendment Act 2015.

“The government should exempt or zero VAT on insurance products in order to make insurance more affordable for the insured and less complicated to manage and regulate,” he said. 

“The present law lacks transparency and hence it is subject to manipulation,” he added. 

“Naturally, there will need to be a transition period if the government does decide to repeal this debilitating amendment. 

“Such as risk management strategy will inure to the benefit of taxpayers as a whole, since it will assist in alleviating the burden that it placed on the government each time a natural disaster strikes The Bahamas,” said Seymour.

The Bahamas is one of the few countries in the world which assess VAT on insurance products.