The island’s bankers have shot down a proposal by the Barbados Hotel and Tourism Association (BHTA) that would guarantee timely settlement of Value Added Tax (VAT) refunds to hoteliers.
The Barbados Bankers Association (BBA) said the factoring programme – through which the banks would pay the VAT refunds to hoteliers and collect the outstanding monies from the Barbados Revenue Authority (BRA) some 90 days later – was doomed to fail because the banks had no confidence in Government’s ability to pay on time.
“The problem is that it is supposed to be a 90-day facility. Who has just been waiting for VAT for 90 days?” BBA President Donna Wellington today asked the BHTA’s first quarterly general meeting at the Hilton Barbados Resort.
“If you have been waiting for longer than 90 days, after 90 days the facility lapses and the guarantee then becomes one that is due for payment. What is the probability of that happening? 100 per cent, right?”
The BHTA has complained that its members are owed tens of millions of dollars in VAT refunds, money that is critical for their operations.
The grouping of hotels and tourism facilities said it was still in the process of assessing just how much the BRA owes its members and for how long.
However, its finance committee is proposing to initiate discussions with the banking sector here about a possible factoring programme similar to that provided for the small business sector.
Chairperson of the BHTA Roseanne Myers said it was the association’s “vision” that commercial banks, on behalf of Government, would provide the amount owed to the hoteliers in VAT refunds, since the banks were considered “flush” with cash, and would later collect that money from Government.
However, Wellington said the banks had a responsibility to depositors “to not do loans that we think are going to go bad” or not to lend to those they believed would not be able to pay.
“If I know that the probability of something going bad is 100 per cent, should I do it?” she asked.
The Central Bank of Barbados currently offers a Value Added Tax Receivable Liquidity Facility (VRLF) for small businesses, which do not include hotels, given the terms and conditions of the facility.
Among the criteria, the VRLS is available to small businesses as defined under the Small Business Development Act or other businesses which satisfy any two of three other criteria – the business must have no more than $1 million as stated or paid up capital, no more than $2 million in annual sales and no more than 25 employees.
The Central Bank facility guarantees payment on credit from $3,000 to $50,000 for any one VAT refund and shall not exceed $100,000 for any one business.
However, a persistent Myers insisted the programme can work for hoteliers if the lending institutions were willing to use the Central Bank’s facility as a guideline, with some changes, including lengthening the credit period from 90 days and increasing the guaranteed amount.
In addition, she said “because the banks have a lot of money, we are saying to them the interest that would have accumulated for the three years we have been waiting you can have that. Well, it is a matter of how much confidence the bank has in whether they will get their money or not, right?”
Acknowledging that the BRA had a cash flow challenge, BHTA Chief Executive Officer Rudy Grant said the association would also consider holding talks with the National Insurance Scheme “to explore the options that may be available as it relates to offsetting the VAT monies owed against NIS requirements”.