How to record GEBE blackouts in the Tax environment
Colombian educated Certified Risk Analyst, Terence Jandroep CRA CQA CLA, contemplated the constant energy blackouts that has created significant losses to the Small & Medium Size Enterprises and explains how losses are unnoticeable accrued.
Sales and Energy synergy
A company with a sales level of $ 300,000 per year and opens 6 times a week, could be interpreted that the sales volume was acquired with an energy intensity of 2,496 hours (312 days x 8 hours) per year. This formula illustrates that the energy supply is aligned with the sales volumes. This example establishes that the company achieves average sales of $ 120 per hour. In addition to the sales, the cost of labor and fixed costs play a fundamental role for losses computations.
Payroll and Energy synergy
The employer cannot deduct unworked hours under the mentioned circumstance based upon the “no work no pay principle” due to energy blackouts, meaning the HR costs remain constant. This would be unconstitutional as the minimum wage is preset. In our example it is fair to mention that depending on the company’s branch of activities the Payroll expense could be around 14% of your total sales in retail businesses and 65% in service providers like Lawyers, Accountants and IT companies.
We will consider the service providing companies as the starting point of our calculation. The result of loss of productivity is calculated as follows: 65% of $ 300.000= $ 195.000 / 2,496= $78.= per hour, totaling $ 198, = hours in loss of earning capacity and ineffective labor cost burden.
Should GEBE have energy setbacks of 100 hours per year, this totals $ 19,800,= in which up to now is not reflected in your Profit and Loss for recovery.
Irrational capacity Warehouse & Office space
In addition to the sales and payroll setbacks, the entrepreneur also faces an irrational capacity of workspace, meaning a building or office for which Rent is being paid and with no use during the energy fall outs. Our example is based upon an estimation of an average monthly rental price of $ 2,500 for a Warehouse & Office space in Sint Maarten, representing $ 30,000,= per year/2496= $ 12,= per hour. This computation results in a total of $ 1,200 in loss in irrational capacity.
Interest financial institutions
In the case of Banks the interest charge runs with no exception and if you pay an average of $ 18,000 per year in interest, it relates to $ 7,= per hour or $ 700,= on the 100 hour example. The fact is that GEBE’s 100 hours energy setback caused a corporate loss of $19,800+$1,200+$700= $ 21.700 (based on this example) subjected to a financial recovery curve.
Losses of Pandemic not allocated
The Pandemic 2020 presents similar conditions and are explained in the following example: By the Governor’s Instruction companies were ordered to shut down 3 months @ 208 hours per month = 624 hours. By extrapolating the same previous example, the results remain consistent with 624 hrs/100 hrs* $ 21,700 = $ 135,408,= in losses for the year 2020.
The mentioned loss less the liquidity support confirms the realistic financial downfall during the Pandemic, with this illustration as a starting point, although this article indicates “examples” of losses, there are the scientific formulas to compute the company’s “Net Worth/Profitability Devaluation” after the Pandemic and Hurricane Irma, that will indicate much higher unnoticed losses.
The ignorance of the Corporate Loss science, places Risk Analysts/Auditors in heavy demand, due to their knowledge of determining business risks “real” values. It is very disturbing that companies in Sint Maarten are paying taxes while the extraordinary conditions of business enterprises dictate losses.
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Related links & articles:
Opinion piece: “Industry standards”
Public statement NV GEBE
Fun facts about GEBE from former Minister of Finance Ardwell Irion
Rebuttle Jerome Chittick via Facebook about NV GEBE
Terence Jandroep Letter to the Editor about GEBE
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