The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) “definitely” generated more than the $150 million net revenue increase targeted for the 2015 first half, a top official yesterday revealing that June’s compliance rates matched those for the first quarter.

John Rolle, the Ministry of Finance’s financial secretary, told Tribune Business that the Government’s VAT expectations for the six months to end-June had been “more than met”.

As a result, the Christie administration remained confident that its forecast for VAT to generate $400 million in gross revenues for the full 2015-2016 fiscal year will be met.

June was the first month in which all the Government’s near-6,000 VAT registrants had to submit returns and due tax payments, as it represented the first filing deadline for bi-annual registrants.

Those are businesses with annual turnovers between $100,000 and $400,000,but Mr Rolle told Tribune Business that compliance rates - in terms of meeting both the filing and payment deadlines - had remained in line with the mid-80 per cent range achieved by quarterly filers in March.

While unable to provide a dollar figure for how much VAT the Government collected with June’s filings, Mr Rolle said: “We’re seeing results that are pretty much in line with the first quarter in terms of patterns.

“It is satisfactory in terms of the pace of the filings and the payments. We’re seeing that trend keep up.”

Mr Rolle, who is also the acting VAT comptroller, said “more than 90 per cent of the large businesses are coming in very close to the date, and we’re in the mid-80 per cent range in terms of initial responses by mandatory quarterly filers”.

Large businesses with annual turnovers exceeding $5 million must file and remit VAT payments to the Government on a monthly basis, while those with revenues between $400,000 and $5 million must do so quarterly.

Mr Rolle yesterday said most VAT registrants had “got over the hump of the deadline” in meeting their mandatory filing and payment obligations.

He added that the compliance rate for quarterly filers was likely to “go up into the 90 per cent range as more returns come in”, and the VAT Unit started to contact late payers and encourage smaller businesses to make payment.

“Generally speaking, the return patterns are holding up from the first quarter,” the Financial Secretary told Tribune Business

“The pattern is one that gives us some comfort that businesses are behaving similar to the first quarter in terms of returns.”

Mr Rolle said the relatively high compliance rates, which are key to ensuring the VAT rate remains at 7.5 per cent, have enabled the Government to “comfortably” hit the revenue targets it had set for the new tax in its first six months.

“For the half year, we said there’d be a $150 million improvement in the Government’s collections, and we’ve definitely seen that expectation comfortably met; more than met,” Mr Rolle told Tribune Business.

“We definitely did see more than $150 million collected on a net basis. That is speaking to the compliance undercurrent we see.

“We continue to believe we’ll see the forecast for the fiscal year, the current fiscal year, met. We do expect the Government to collect in the range forecast.”

Mr Rolle confirmed the Christie administration is expecting to collect more than $400 million in gross VAT revenues for the year to end-June 2016, although this sum will not all translate directly into new monies or revenue growth. Some of those revenues will replace the Stamp Duty previously earned on residential real estate transactions, for example.

The Financial Secretary added that outperforming the initial VAT targets “is a big achievement in the sense that we think the Government will have the flexibility to look at other reforms relating to revenue”.

He explained that VAT’s relatively successful implementation would allow the Government to “shift [revenue] dependency to areas where compliance and enforcement are more effective and easier to perform”.

“The proactive stance is that whatever it is we’re doing, with aggressive oversight and follow-up we can see improved turnout,” Mr Rolle said.

“The focus is on making sure the improvement needed in compliance and enforcement systems is followed through on, so as to ensure we get maximum performance and get businesses to stick to that pattern.”

Mr Rolle said there had yet to be any prosecutions of persistent VAT offenders, consistent with the Government’s ongoing ‘light touch’ enforcement efforts.

“A lot of enforcement efforts have rested around administrative penalties and fines,” he explained. “Where the businesses have consistently failed to meet on-time filing obligations, or came forward and registered late, those penalties are being levied.”

Mr Rolle said a key focus was now on merchants’ VAT pricing, and “the consumer protection element and transparency”.

Mr Rolle said fewer than 1,000 VAT registrants were bi-annual filers. He explained that the Government had taken advance measures to move them into a more frequent filing cycle by stopping companies going into the bi-annual category when they registered.