IMF, World Bank ‘reviewing VAT, other taxes’ - by Barbados Today
February 9, 2019
February 9, 2019
February 9, 2019
Government has asked the International Monetary Fund and the World Bank to helps reforming its indirect tax system, Drector of Finance and Planning Ian Carrington has disclosed.
The multilateral lending agencies have been invited to advise on how to bring indirect taxes into balance corporate taxes, he said.
IMF tax officials were currently here examining the Value Added Tax, income tax, stamp duty, and betting and gaming taxes among other indirect taxes, Carrington revealed.
He said the officials were holding talks with the acting Revenue Commissioner, the Comptroller of Customs and all of the Government ‘s revenue agencies, along with the private sector and the Small Business Association.
Carrington said: “The reason Barbados has to reform the system is because we have made changes to our corporate taxes, as a result of seeking to be compliant with the European Union and the OECD. We have removed the ring fence between the international business companies and the domestic ones by reducing their corporate tax rate down to the maximum of five per cent.
“As a result, this creates the opportunity for individuals to corporatize, that is, set up themselves as a business to seek to pay a lower level of taxes by making themselves appear to be a business.”
As Barbados continues in an IMF programme, Government had to make sure there were no deficiencies in revenue collection, the government’s senior civil servant on the economy said.
Carrington continued: “The result is to bring both the direct and the indirect taxes back into balance. Therefore, we are pressing ahead to reform the indirect tax system by the next financial year [which starts in April], and so the IMF tax team has to get back to Government with its suggestions before the end of this financial year.”
He added that the World Bank will give technical help to the government to implement policy changes and ensure that its systems and procedures were correct.
15 Replies to “IMF, World Bank ‘reviewing VAT, other taxes’”
Wow, well within this big brother system of “u hit me and I hit them”, the masses can only expect one road with many branches.
“As a result, this creates the opportunity for individuals to corporatize, that is, set up themselves as a business to seek to pay a lower level of taxes by making themselves appear to be a business.”……
People and corporations will always find a way to reduce their tax burden. Cant blame them. Now the government is looking to make up for the short fall in taxes due to reducing the corporation tax basically to nothing.
It is necessary to find revenue that do not include increasing the taxes on individuals any further.
I suggest taxing alcohol, cigarettes, sweet drinks and herb.
I suggest they get those businesses who dont pay what they are supposed to pay into the system and tax those persons who have more money to pay into the system.
In order for the system to work….EVERYONE should be paying into the system. The burden cannot and SHOULD NOT be on the shoulders of only the poor people. Otherwise one day the system is going to collapse and I think we are nearly there for this to happen bcos there are wealthy people who do not pay into the system period !!
The plan should be to get the private sector to pay in all those FUNDS they own the Government.
That comment that was made about persons forming a company to pay lower tax is a joke. Even if the company pays the 5% tax the owner can not draw on the remaining profit without either pay it in the form of a dividend or a salary or a mix of both options. Once this is done the owner must pay the dividend withholding tax to government or income tax at current tax rates on what is drawn as salary. Under our system you just can’t pay the 5% Corp tax and then take up the rest. Remember company money don’t become owner money by just writing a cheque. It has to be paid over and entries lodged to account for its movement. Plus when ever it does move their is a tax bracket for it.
Its will be cheaper to pay Corp tax @5% and withholding @12.5% than to pay income tax
Let me break down for you why it never paid to make a profit in Bim under the old tax system as a company and why many never bothered to expand. For the formula let’s stick with a company making $100 in profit, so here goes.
First they paid corporation tax which at one time was as high as 40 percent. So the $100 in profit down to $60 now. So let’s say the company said well we will retain half of that and pay out the other half in dividend. So the owner then should get a $30 dividend right? No don’t work so he has first to pay a dividend tax of 12.5 percent first. So he down now to 25 dollars, so he say fine let me put my 25 dollars that start out as 100 dollars on the bank now then what happens? The interest he does get then must pay a withholding tax of 12.5 percent to government first! So tell me I beg of you where was the incentive to expand under the old tax system? Next time you hear a company made an after tax profit of $100 stop and remember how much is paid in more taxes before the owner sees a cent.
Bupps i agree with you and so it should be. A company can not expand unless you can convince the shareholders to invest more money, or the bank to lend more. If you listen to local dividend payments you will see a share with a value of $5 paying 12 cents in dividend. So how you going go to that shareholder and ask him to invest more to grow the company, when you paying him that poor a dividend? This move that was forced on us to drop the corp tax rate is the best thing that could happen to businesses here for the sake of growth. Yes the government may collect less corp tax, but if companies grow they will collect more vat, more employees mean more income tax and national insurance for the state. More imports means more duty at the port and more foreign exchange based retail, means more USD in the bank. Plus this move may encourage some to take up the billions sitting in the banking sector and do something with it! For the first time in Bim the risk to reward ratio can actually encourage dormant money to get up and work for its owners. I think you are going to be surprised when you see how much dropping the tax rate will generate in the total picture. I mean when you hear that for a whole day sometimes our stock market can only trade 2000 shares at $4 you got to see my argument.That level of trade and billions in the banking sector paying its owners 0.005 percent, out of which they pay a withholding tax of 12.5% to the state. Lord man the writing there for a blind man to see, improve the risk to reward ratio and lets put the money to work!
I suspect that the government has no other choise but to raise the dividend tax to compensate for some of the loss of corporate tax. This will still be better than paying the old corporate tax rate.
Without a doubt I just hope they don’t look at the corporation tax at 5% and say well it is one fifth what is was at 25 so we going bring new taxes to make up the 20 percent we lost as that would be madness. They have to see that every year Corp tax been falling and for many reasons. In my view it is better to encourage growth and take 17.5% of the sales than stifle it where you taking high Corp tax off the bottom. Think about it the average pretax rare is about 4 percent of gross sales. You would prefer 5 percent of that or let the companies grow. If their sales grew 15 percent you could then take 17.5 of that increase in vat. Any 11 plus student could tell you which would be greater. That’s why I say don’t rush to tax bajans more for what you think might be a fall in taxes when in fact they May end up collecting more if the companies grow, even by as little as 10 percent the vat on that growth would more than right off the fall on corporation tax.
Mr.Director of Finance, the formation of BRA has destroyed the institutional knowledge of the former legacy of Inland Revenue Department . Some of that said knowledge is still available. You just need to reach out.
The BLP looking for more efficient ways to screw us taxpayers. The party that drafted BERT(the economic rapist) will soon tax us for each fart. The 26 fat cats that occupy Parliament, are living large off their huge salaries. They still refuse to surrender a 15% cut in their pay, to show solidarity with the thousands of public workers the BLP has fired so far.
Johnny crow that will happen when black bird cut teeth
I just hope government don’t expect to increase taxes on the individual income taxpayers. This relatively ‘small’ group of citizens have borne the brunt of taxes for many, many years.
Was personal income tax not supposed to keep decreasing towards zero when VAT was introduced??
A tax rate (max.) of around 37% + 17.5% VAT + BWA levy + SSA levy ++ + + …….. many others = you get a few cents from the dollar you earn. Wonder why people try to avoid paying taxes???
Like almost all governments, they prefer to increase taxes on the ‘captured’ group of individual taxpayers than go for ‘volume’ at lower rates.
Tell me….. how many ‘small man’ business owners pay personal income tax?? Think your coconut vendor, beach vendor, jet ski operator, ZR driver, etc… paying personal income tax??? Bet they all go home with more $$$ in their pocket than me, from my retired NIS pension…. which I have to pay personal income tax on…!!!
If I have more money, I spend more money….simple! Then they will collect more from me via VAT and similar ‘tax as you use’ items under products & services. We all must contribute…. spread the burden!!!