VAT debts write-off as amendments pass

The Labour Party administration has kept a mini-budget pledge made shortly after coming to power last year,  writing off outstanding Value Added Tax (VAT) debts from its first four years and waived their penalties and arrears. But an outspoken Opposition voice in the Senate condemned the amendment to the VAT Act as forgiving “criminals” for evading the tax.

As she introduced the VAT Amendment Bill in the Senate during its post-lunch session, Government Senator Kay McConney said: “Following further consultation with the Barbados Revenue Authority, it was determined that we would write off the unpaid taxes from 1996 to 2000, and the waiver of penalties and interest incurred on arrears should start from January 1, 2001, and extend until December 2017.”

But Opposition Senator Caswell Franklyn strongly disagreed, declaring the defaulters “criminals”, some of whom were among the bigger companies on the island –  according to a register of defaulters he perused in the Registry Department –  should be made to pay their outstanding debts.

Senator Franklyn declared: “This bill is purporting to forgive criminals, people who received money on behalf of the Government and kept it.

“The people who did this should have been hauled before the court, not forgiven.

“When you pay VAT on an item, the businessman should put the VAT amount aside to pay it to the Government.

“Now you are asking this Senate to breach the Constitution and forgive a crime.”

Senator Franklyn added: “If you refuse to pay VAT, income tax or NIS, [the] director can file an unpaid tax certificate to say certain taxes were not paid; this becomes a judgement of the court.

“You have to go to court and prove you did not owe the money. All Government has to do is renew these judgements every five years.”

His colleague, Senator Crystal Drakes, queried why those four years – 1996 to 2000 – were chosen and whether any VAT defaulters had approached the Mia Mottley administration calling for debt relief.

The economist queried: “Why these four years? VAT started in 1996, but you can only owe VAT if you have collected it.

“If you were going to write off VAT and had to choose a four-year period, you could have tried 2008 to 2012 after the global recession when many businesses were challenged, but was 1996 to 2000 a difficult time, too?

“I also want to know if anyone came knocking on Government’s doors asking for relief from their outstanding taxes because we are not aware of this.

“Does the Government know how much money is being written off or waived?

“VAT is supposed to bring in $948 million, or 30 per cent of the revenue we have to make for this year, yet according to my colleague’s findings, the penalties, arrears and interest we are seeking to write off add up to a billion dollars.”

Responding to the Opposition senators’ claims, Senator McConney said: “The tax penalties and interest have not been waived from 1996 to 2000, but only penalties and interest for January 2001 to December 2017”.

She stressed that it was not debt forgiveness, but more of a debt write-off, in that “the penalties and interest will only take effect as long as the tax arrears are paid off or an arrangement is made with the [Revenue Authority] before the deadline given to do so”.

In support of the amendment, Senator Lynette Holder, long-time chief executive of the Small Business Association, declared that the previous Government’s failure to pay out VAT refunds had contributed in part to the demise of several smaller enterprises in recent years.

“Between 2015 and 2018, [the SBA] did a survey and 240 small firms closed their doors.

“Not all of them were owed VAT refunds, but they were impacted by what was happening economically at the time, and they could not maintain their competitiveness.

“This bill is correcting a wrong in my view, as we would have owed millions in refunds and because the last Government refused to pay, it might have caused these businesses to go under.”

Senator McConney said that the outstanding VAT had become difficult to collect and in some instances, the defaulters had died or their businesses had closed down.

She insisted: “While we have ‘written off’ the debt, it does not mean the taxpayers do not still owe it.

“In fact, the BRA has recently put out a request for proposals for debt collectors, because we intend to go after our defaulters.”