The decision to delay the implementation of the Value Added Tax (VAT) on online shopping will not impact government’s revenue haul, Central Bank Governor Cleviston Haynes has said.
He explained that this new tax, which was to be implemented on October 1 but is now delayed until December 15, was mainly a mitigation measure to buffer the other tax measures that were also announced in the June 15 mini-budget.
“Generally delays in the implementation will have an impact and if you are unable to implement on a timely basis then you will have to take corrective action either through additional tax measures or by cutting your expenditure,” Haynes acknowledged.
“As it relates to the online tax, unfortunately there would be some lag between announcing and implementation of that tax. Therefore the revenue from that tax in a sense forms part of the mitigation for the other measures, which we have. That has not really been built into the estimates that underpin the six per cent target that we spoke about but obviously, to the extent that there is underperformance elsewhere that will help to mitigate that underperformance,” he explained.
He said the critics need not worry that government would get a shortfall in revenue for the remainder of the fiscal year.
“I wouldn’t worry too much at this point on the fact that it has not yet come into force,” said Worrell.
Recalling that the initial implementation of the VAT turned in more than anticipated for the first year, Haynes explained that whenever new tax measures were being implemented there was always the risk of collecting too little or a lot more than initially anticipated.
“You do have these risks once you impose new taxes and therefore you have to be flexible enough to make the adjustments, whether through additional tax measures, which I suspect is not likely, or by what we do on the expenditure because your margin of error tends to be very small,” he added.
Besides the delay in the VAT on online transactions, government did give an indication that it would review the tax rate for hotels and other heavy users of water. This rate was implemented on August 1, and is equivalent to 50 per cent of the water bill of commercial entities. Householders on the other hand, are charged a rate of 1.50 per day.
This week, Minister in the Ministry of Finance Ryan Straughn revealed that government had raked in some $26.1 million from the fuel tax, which replaced the road tax on July 1.
This, he said, was an indication that government could surpass its initial projection of $65 million from that tax per year.