The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A senior Ministry of Finance consultant yesterday dismissed the private sector’s call for quarterly Value-Added Tax (VAT) filing and reporting, saying this “would not suit the Government’s position”.

Ishmael Lightbourne, the former PricewaterhouseCoopers (PwC) partner who is now a member of the VAT implementation team, said that filing returns within 21 days - as is proposed - created less risk for the Government in terrms of revenue collection, and was more manageable.

The private sector has argued that filing VAT returns within the prescribed 21 days from month’s end is too onerous, but Mr Lightbourne told Tribune Business it was ultimately a “cash issue” for the Government.

“If the Government is going to say report to me quarterly, what is it going to do in those intervening months?” he asked. “The Government still has to pay salaries and rents. The Government is just like a household, same expenditure just multiplied many times over.

“A quarterly reporting requirement certainly would not suit the Government’s position. If you tell people report quarterly, it means that they are holding on to your money for 90 days. The risks are much bigger. In 30 days they would be collecting and holding less money, which is manageable.”

While the Christie administration is obviously concerned for its cash flow, Barbados has quarterly VAT reporting.

But Mr Lightbourne sought to allay private sector concerns that VAT would create serious cash flow issues for business, adding: “In the normal VAT position, it is the business itself that controls its process. The business collects the VAT, pays the VAT and the net amount it pays over to the Government.

“No issue of any reclaiming or asking for any refund arises. The refund position is an exceptional position; it is not the norm. If you’re paying out more money than you are collecting, how long could you be in business?

“In the normal course of a business operation the VAT that it will be collecting from its customers on its sales will be greater than the VAT that it will be paying on the purchase for imports and other goods and services. They will generally owe the Government.”

To illustrate the point, Mr Lightbourne added: “If you are a registered business and you are stocking up for the Christmas, and during that month also build another warehouse, which attracts VAT, your November sales may be lower than all your purchases, meaning that you would have paid more VAT than you would have actually collected.

“That doesn’t always happen. Generally, you would find that the business is collecting more VAT than it is paying. In those special cases where they pay more VAT - either because they bring in a big import or they make a substantial investment in equipment - what the system does is say we will recognise that as a credit for you, put that aside, and when you report next month see how your reporting looks.

“It may then be the case that you are back in your normal trend where your collections are bigger than your payments. Any difference will just reduce that credit. If you have such a big credit that it can’t be reduced over three months, then after that three-month period you are allowed to make a claim for that particular credit.”

Mr Lightbourne said suggestions that VAT would create a cash flow nightmare were largely distorted.

“I think a lot of people believe it’s going to be a cash flow nightmare, and they’re acquainted with the slow process of getting refunds right now,” he added.

“Some claim they overpaid at Customs and it takes them three to four months to get their money back, or just getting some payment out of the Government period. That may be true. Business persons will manage the cash flow systems themselves in their own reporting.”