The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Value-Added Tax (VAT) Unit will adopt a risk-based approach to determine which quarterly and bi-annual filers must pay due taxes monthly, a top official telling Tribune Business: “Some filers could be spared.”

John Rolle, the Ministry of Finance’s financial secretary, told Tribune Business that the VAT Act amendments unveiled in last week’s Budget were intended to “strengthen safeguards” against the non-payment of taxes building up in the accounts of businesses with annual turnovers of less than $5 million.

Tribune Business last week revealed several of the ‘devil in the detail’ provisions contained in the Budget, which include the proposed amendments to the VAT Act.

The changes include giving the acting VAT comptroller, which is Mr Rolle, the power to require quarterly and bi-annual filers - who by law must remit the taxes collected on the Government’s behalf every three and six months, respectively - to pay these on a monthly basis.

The proposed amendments state: “The Comptroller may require a registrant to make interim monthly payments of VAT, and shall reconcile the payments made against the filing of VAT returns.”

Mr Rolle told Tribune Business: “On monthly payments, the proposal is to strengthen safeguards early on against any build-up in VAT that goes uncollected.

“This would help to avoid the funds being put to other use and not paid. Even if the record-keeping is up to standard, it is important to minimise the risk of the cash being misdirected for working capital.”

When asked to confirm if the ‘monthly payment’ approach would be applied to all quarterly and bi-annual filers, who account for roughly 5,500 of the 6,000-plus VAT registrants, Mr Rolle seemed to imply that many would be impacted.

“The approach will based on assessed risk. So some filers could be spared,” Mr Rolle told this newspaper.

The Financial Secretary appears to be taking a harder line than Michael Halkitis, minister of state for finance, who last week suggested that the ‘monthly payment’ requirement would only be enforced against VAT registrants who were delinquent, filed late or did not pay the sums due.

Mr Halkitis’s view appears to be closer to the language in the proposed amendment, which is also different from the wording employed in the document attached to the Budget communication,

This says the Government plans to “amend the VAT Act to specify that all registrants, including those that file quarterly and half-yearly, pay VAT collected on a monthly basis”.

This suggests that the ‘monthly payment’ requirement will be made mandatory for all quarterly and monthly filers, indicating that the Government needs to ensure its language remains the same in all Budget documents.

The VAT Unit has been encouraging such filers to make payments monthly, so that due taxes do not build up in their accounts and they become tempted to use it for working capital.

Already, many quarterly and bi-annual registrants have opted to pay VAT monthly to the Government, rather than wait until the filing of their returns becomes due.

But the Government’s anxiety to boost its cash flow, and receive all that is due to it, is evident from the fact it is also proposing another amendment to the VAT Act that requires all registrants to keep taxes collected “in a separate account”.

Mr Rolle confirmed this objective to Tribune Business, saying: “The segregation provision is to ensure that businesses keep track of payments that are owed to government, and that these are not grouped as part of their general assets.

“VAT is a trust tax, in the sense that the sums collected are the Government’s. Separation is an accounting mandate more so than a banking requirement.”

The Act amendments also clarify the Government’s intentions with respect to electronic filings. These will only require large registrants, those with an annual turnover of greater than $5 million, to file electronic “particulars on VAT invoices, tax credit notes or tax debit notes issued or received by the registrant”.

This is different from the language employed on the last page of the Budget communication, which says amendments will “require all VAT taxpayers to provide electronic files with particulars on VAT invoices, tax credits and debit notes issued or received by the registrant”.

The different language employed again highlights how confusion and uncertainty, none of which is good for business, could be caused by amendments that do not line up with what is in the Budget document.