Small business owners are being told that they will not have to pay Value Added Tax (VAT) twice if they have already paid the tax while making an online transaction, one of the Government’s top consultants on the economy has told the small business association.
Starting on May 1, Barbadians buying goods and services online will be required to pay VAT on any taxable items at the point of purchase, as opposed to when the items land here.
Special Envoy to the Prime Minister on Investment and Finance, Professor Avinash Persaud, has told the SBA’s monthly information session: “The system is set up so we avoid double taxation. When you purchase a good or service that is subjected to VAT, you will pay the VAT online, you will get an electronic receipt on your phone, tablet or other devices, or you can print it if you so choose. When you go to the port to collect the item, once you show the Customs Officer your VAT receipt you are free to go. However, if there is a situation in which you have paid VAT on the product but not the shipping costs, the officer will work out the difference between what you owe and what you have already paid, and that is all you will have to pay.”
Government has spoken to the 12 main online payment processing services including PayPal, Mastercard, Visa and American Express to advise them of the products that attracted VAT so they could apply at checkout, the economist said.
He stressed that the VAT only applied to such products if they were going to be consumed in Barbados.
“There are two things they check on, and that is whether the product or service is VATable in Barbados and if it is being consumed here. Now, the company would not always know that, and if it does not, then it would not charge the VAT.
“If you book a hotel room in Barbados or rent a car you plan to drive while on the island online, you will pay the VAT for that as those services will be used in Barbados.”
But Professor Persaud also noted that if consumers paid local suppliers directly with their credit cards they would not be subjected to the online VAT charge and that it was not an attempt by Government to trace people’s credit card purchases.
Government was losing some $50 million in revenues as a result of not recording, or under-recording, such purchases, he declared.
“This is not a new tax but a new way of collecting an existing tax, and we should gain $50 million from it. Now to put this into perspective, if we collect the $50 million we may be able to lower the VAT rate by at least one percentage point; $50 million is almost half what we spend on UWI, and a significant chunk of what we spend on the Queen Elizabeth Hospital, so if anyone has a better idea as to how we can raise this money, let us know and we will think about it,” he said.
Professor Persaud also sang the virtues of the Barbados Economic Recovery and Transformation Programme (BERT), which he described as “the most shared adjustment programme in world history”.
“With this programme, we have shared the adjustments between creditors and borrowers very evenly, we have shared the adjustment between government workers and taxpayers evenly, and we have also shared it uniquely between residents and non-residents through the increased VAT and the room rate levy.
“Barbados now has the lowest tax rate in the world for non-zero compliant countries in the OECD, and we have reduced our labour, income and corporate taxes, but increased them on land and transactions. The reasoning behind this is that when you tax land, you encourage people to use it, and this will support investment.” (DH)