Government’s decision to put the brakes on its implementation of Value Added Tax (VAT) on online transactions could save Barbadians thousands of dollars in the short term, says President of the Barbados Small Business Association, Wayne Willock.
He said a number of local businesses rely on online transactions for stock, and would have been severely affected if the dreaded tax was rolled out on the revised December 15 date.
“I believe that small business owners would welcome the postponement especially during the Christmas period,” he said, while admitting that the association’s secretariat is yet to complete a survey to determine what percentage of membership would be affected by the online VAT.
“The implications as far as I can see would be that the final payment could be as much as 20 per cent added to cost – the Forex (foreign exchange) fee that is performing very well from all reports at two per cent, plus the VAT at 17.5 per cent, not only on the items purchased but also on the shipping costs.
“There is need for concern since for the most part the additional costs will be passed on to the consumer. Nevertheless, even with the online VAT, a person may still get a better deal there, but at least they would have made their VAT contribution. It would still be an individual’s choice,” he noted.
Yesterday, local businessman Eddy Abed expressed disappointment with the postponement of the tax, saying that its introduction would level the business playing field. “I think it’s important that we do it sooner rather than later, but equally I want to make sure that the mechanism is fair for all and that there is absolute clarity so there is no ambiguity,” Abed told Barbados TODAY.
On the contrary, Willock suggested that Government should take its time and iron out a number of grey areas relating to the tax’s application.
“For example, who will do the actual collection? Will they be VAT-registered in Barbados with a relevant Taxpayer Identification Numbers (TIN)? Will the invoice for the purchase follow the requirements of the BRA (Barbados Revenue Authority) where the company name, address, date and VAT number are clearly visible on the printed copy of the bill and not just a simple receipt?” he asked.
Willock agreed with Abed, the managing director of the Swan Street fabric store, that steps must be taken to promote fair competition. He however pointed out that many small businesses benefitted from the ease of transactions as a matter of necessity.
“The tax should not be scrapped since urgent revenue is needed. However, I see a big difference between a business which has of necessity to purchase product or material from overseas, not available here, in order for their business to function and an individual who by choice or preference makes purchases online to get better prices, bypassing the local merchants, including shoes, clothing, car parts, perfumes, gifts.
“They need to make their contribution as well. The VAT for businesses should not be the same. But how is that distinguished online? Will entities like Paypal be involved?” he asked.
Willock also disagreed with Abed’s suggestion, that large businesses face greater challenges than small ones, since larger enterprises are in a better position to order in bulk and get “better” prices.
In addition, he said small businesses should not have to compete by the same rules as their larger, more established counterparts.
“Any framework for the implementation of the tax should encompass all businesses, whether, small, medium, micro or very large. Maybe there could be categories based on average gross income. That should not be difficult since the average micro business hardly grosses $200,000 per annum as against a larger one doing over $10 million. A lot of thought must go into the process in the final analysis,” he concluded.