Local taxpayers owe Government over $400 million in outstanding Value Added Tax (VAT) payments.
The figure has emerged from a recent special audit of the management of the accounts receivable in the VAT Division conducted by the Auditor General’s Office.
The Auditor General has expressed strong concern over of the level of indebtedness to the VAT Division, which falls under the new Barbados Revenue Authority.
Of further concern to Auditor General Leigh Trotman is the fact that the figure for outstanding accounts receivable has been increasing at an average rate of 13 per cent or $48 million per year.
”At the close of the financial year 2013-2014, the outstanding receivables at the Division were $475 million,” the recent audit shows.
Of the total amount, $207 million or 43 per cent represented interest and penalties.
The audit has revealed that businesses were among the primary defaulters to Government when it comes to paying the 17.5 per cent tax, accounting for 83 per cent of the accounts receivables.
This compares to 13 per cent, which was owed by individuals and the remaining four per cent by Government departments and statutory boards.
“The Division did not have an effective accounts receivable management strategy,” pointed out Auditor General Leigh Trotman in his 2014 report in which he also stated that the Division’s collection efforts had not been effective.
Furthermore, the Auditor General said a large component of receivables – 57 per cent – were aged five years and over.
“Therefore, it is likely that a significant portion will be uncollectible,” Trotman warned, while suggesting that the Division needs to recommend to Cabinet that those debts which are deemed to be uncollectible, be written off.
“The more aged a receivable is, the less likely it would be collectible,” Trotman argued, adding that “the Division also needs to reassess its position on the provision for bad debts.”
It was not clear on what basis the provision for bad debts was arrived at.
The Auditor General was also critical of the department’s handling of garnishments for defaulters.
He said quite often there was no follow-up of installment agreements or garnishments, pointing out that from a number of accounts sampled, a high percentage of the taxpayers were in default of their agreements to repay.
“In addition, out of a sample of fifty (50) garnished accounts examined, no payments were received from third parties for one year or more. In the above instances, no further action was taken to collect the outstanding amounts,” the Auditor General said.
Trotman noted the VAT Act gives the Division the power to seek legal remedies in the collection of outstanding amounts. However, he said while the audit had found that the Division had sought the assistance of the Solicitor General’s Office on this matter, none of the unpaid tax certificates sent to the Solicitor General’s Office were enforced.
He also noted no monitoring and review of the accounts receivable process was done by the management of the Division.
Last year, Revenue Commissioner Margaret Sivers had warned that no one would escape, as the new agency – which merged Government’s four revenue collection bodies – intended to deploy an intelligence gathering approach to capture persons currently outside of the net.