As companies and individuals prepare to file their 2014 income tax returns, thousands are going to have to wait a while longer to receive their refunds for 2013.
Businesses owed Value Added Tax (VAT) refunds face the possibility of an even longer wait because, as Minister of Finance said today, making these payments will be “a little bit more challenging”.
Leading off debate on the 2015-16 Estimates in the House of Assembly this morning, Sinckler said outstanding tax refunds to both companies and individuals stood at an estimated $250 million.
He admitted that Government was experiencing serious cash flow problems which had not only delayed payments to suppliers of goods and services but also to individuals and businesses.
However, he said the majority of individuals and businesses awaiting refunds should get them by the end of June or July and the remainder by September.
“Regarding the major concern of the VAT, income and corporation tax returns, we are currently putting the finishing touches on a plan to have more than 85 per cent of those income tax refunds for the income year 2013 paid,” Sinckler told the House.
He added: “There are currently around 47, 000 such claims and we expect that by the end of June/July, we should be able to satisfy more than 37,000 of these, while the remainder would be done before September 2015. We equally expect that practically all of our corporation tax refunds should be completed by the same date.”
“The VAT returns issue will likely continue to be a little more challenging as it is not just an issue of the impact of cash flow, but also in the processing and administrative delays accompanying how those returns are done. We have already hinted that Government, as part of the tax reform process, intends to retire the VAT return system entirely,” he continued.
“However, that is still a few months away and greater details on that part of the tax reform process will be spoken to in the upcoming Financial Statement and Budgetary Proposals.”
In the meantime, Sinckler said the intention was to utilize various approaches included setting off against debts owed to Government, issuance of government papers where acceptable “and other measures” in order to speed up payment of VAT returns to all businesses, especially the smaller and medium sized enterprises, “which have been severely affected by the significant delays”.
He also revealed that Government was in discussions with a finance company “looking at a possible VAT factoring project”. This, he explained, would result in “several businesses” being able to get payments on existing submissions “while Government finances pay back the finance company at a pace more consistent with the cash flow”.
He opted not to name the finance company, but said details of that development would be made public within the coming weeks.
But Alex McDonald, chairman of the Barbados Private Sector Association, suggested that was not good enough.
Acknowledging that the refunds were coming many months later than usual, McDonald told Barbados TODAY that while companies could have overlooked the delays when the economy was booming, that was simply not the case now.
“If you don’t have cash, you don’t have a viable business,” the private sector spokesman said.
Pointing out that the problem of delayed tax refunds was not a new one, McDonald said it was about time that the Freundel Stuart administration “level with the nation” and have a conversation on what exactly needed to be done.
Despite projected improvement in the economy over the coming months, Sinckler said he expected Government’s cash flow problems to continue “well into the next financial year”, with improvements likely in the third quarter.