Private sector politics
Acknowledging that Government could be indebted to the private sector in the amount of $49 million, Sinckler however said if a comparative study was done it would show that businesses owed government $79 million and the VAT office $361 million. An additional $150 million is owed to the NIS. — Barbados Today, Wednesday, January 23, 2012.
Last week’s news release from the Barbados Private Sector Association was in poor taste. It is difficult not to interpret the contents of the news release as a thinly veiled political attack on the stewardship of the ruling Democratic Labour Party administration.
Or maybe the provocative news release was merely a last ditched attempt to shame the Government of Barbados into honouring its obligations.
A cynic may even suggest that it could also have been an attempt to obfuscate the fact that collectively, many companies in Barbados owe the State hundreds of millions of dollars in unpaid taxes and NIS contributions. You decide.
One is left to wonder why the BPSA, a member of the Social Partnership and a critical development partner, did not deem it more appropriate and indeed more efficacious to raise the settlement of State arrears within the tripartite body. What is there to be gained from picking a public relations fight with the Government?
For those of you who missed it, the BPSA shared the results of a recent survey of two dozen companies with the media. It was revealed that the Government owed those companies a cumulative total of $49.6 million. Media outlets reported that the figure was made up of $25.2 million for goods and services, $13.8 million in VAT refunds, $4.5 million due to suppliers of works, $3.9 million in corporate tax refunds and $1 million for diesel rebates.
As you would expect, “the arrears created cash flow problems which curtailed the ability of some firms to meet their obligations…” and receive credit. Regrettably, the Government has also been struggling with cash flow problems, due in part to — you guessed it — corporate tax avoidance and tax evasion.
This sordid state of affairs is the result of callous business management and poor governance perpetuated by successive administrations and a few narrow minded politicians. There are some business people who consider it justifiable to shirk their responsibility of paying the VAT collected from customers into the VAT Office. They use the money for cash flow purposes or their own benefit.
Government has aided and abetted this unlawful practice by allowing and even encouraging lapse enforcement, much to the chagrin of many public officers. Both political parties are guilty of meddling in the administration of tax collection. What motivates this practice?
Perhaps it’s the intoxication of corporate influence or the misguided notion of saving jobs and/or propping up the businesses of inadequate or “wutless” entrepreneurs.
There are those who will disagree with my sentiments. That’s okay. I would only urge them to recognise that being pro-business does not have to be in conflict with being a staunch devotee to the tenants of good governance; corporate and public.
We all should be able to agree on one thing; Government must honour its obligations in a timely fashion and the private sector must honour its. As an aspirant of developed country status, Barbados needs to put an end to the complicit attributes of a tinder box, banana republic and begin to consistently conduct its affairs like the mature, number one developing nation that it is. There is absolutely no justifiable reason why a corporation should owe VAT to the Treasury. Businesses don’t pay VAT, consumers do. They are the ones that bear the burden of indirect taxation, especially a value added tax.
It is unacceptable that faithful taxpayers are inevitably called upon to pay higher rates of taxation in order to meet revenue shortfalls created by tax evaders and tax avoiders. As the BPSA has inadvertently pointed out, such practices do not augur well for the financial wellbeing of businesses or the State.
Public relations stunts will not solve this very serious and scurrilous problem. Nothing short of a commitment to strict enforcement of the laws of Barbados and the resolve to practise good governance in the corridors of the State as well as in the boardrooms of corporations, the offices of humble business and civil society organisations will yield a solution to the legitimate problems identified by both the BPSA and the Ministry of Finance.
I tend to agree with the sentiments expressed by Professor Michael Howard regarding this issue; rigorous enforcement and appropriate penalties ought to be adopted in an effort to mitigate the seemingly pervasive delinquency of some taxpayers.
* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience. C.R.Forte@gmail.com