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Fright and flight

Local taxpayers owe Government over $400 million in outstanding Value Added Tax (VAT) payments.

The figure has emerged from a recent special audit of the management of the accounts receivable in the VAT Division conducted by the Auditor General’s Office.

The Auditor General has expressed strong concern over of the level of indebtedness to the VAT Division, which falls under the new Barbados Revenue Authority.

Of further concern to Auditor General Leigh Trotman is the fact that the figure for outstanding accounts receivable has been increasing at an average rate of 13 per cent or $48 million per year.

Auditor General Leigh Trotman

Auditor General Leigh Trotman

”At the close of the financial year 2013-2014, the outstanding receivables at the Division were $475 million,” the recent audit shows.

Of the total amount, $207 million or 43 per cent represented interest and penalties.

The audit has revealed that businesses were among the primary defaulters to Government when it comes to paying the 17.5 per cent tax, accounting for 83 per cent of the accounts receivables.

This compares to 13 per cent, which was owed by individuals and the remaining four per cent by Government departments and statutory boards.

“The Division did not have an effective accounts receivable management strategy,” pointed out Auditor General Leigh Trotman in his 2014 report in which he also stated that the Division’s collection efforts had not been effective.

Furthermore, the Auditor General said a large component of receivables – 57 per cent – were aged five years and over.

“Therefore, it is likely that a significant portion will be uncollectible,” Trotman warned, while suggesting that the Division needs to recommend to Cabinet that those debts which are deemed to be uncollectible, be written off.

“The more aged a receivable is, the less likely it would be collectible,” Trotman argued, adding that “the Division also needs to reassess its position on the provision for bad debts.”

It was not clear on what basis the provision for bad debts was arrived at.

The Auditor General was also critical of the department’s handling of garnishments for defaulters.

He said quite often there was no follow-up of installment agreements or garnishments, pointing out that from a number of accounts sampled, a high percentage of the taxpayers were in default of their agreements to repay.

“In addition, out of a sample of fifty (50) garnished accounts examined, no payments were received from third parties for one year or more. In the above instances, no further action was taken to collect the outstanding amounts,” the Auditor General said.

Trotman noted the VAT Act gives the Division the power to seek legal remedies in the collection of outstanding amounts. However, he said while the audit had found that the Division had sought the assistance of the Solicitor General’s Office on this matter, none of the unpaid tax certificates sent to the Solicitor General’s Office were enforced.

He also noted no monitoring and review of the accounts receivable process was done by the management of the Division.

Margaret Sivers

Revenue Commissioner Margaret Sivers

Last year, Revenue Commissioner Margaret Sivers had  warned that no one would escape, as the new agency – which merged Government’s four revenue collection bodies – intended to deploy an intelligence gathering approach to capture persons currently outside of the net.

Also see: Special Audit of the VAT Dept Receivables and From the Auditor General’s Report 4.

6 Responses to Fright and flight

  1. Adrian Loveridge March 27, 2015 at 5:00 am

    Why no mention of the fact that Government owes THOUSANDS in agreed but yet unpaid VAT refunds. We now have not received a VAT refund for 23 months.

    • Kevin March 27, 2015 at 9:53 am

      Government must taxes in order to pay the refunds. If businessmen collecting but not paying over the VAT to the government, its only obvious that there will be problems with cash flow.

  2. David March 27, 2015 at 6:51 am

    A system need to be implemented, I know that if you ask the clerical officers who deals with this these matters on the ground ,they can give a solution, because they are hands on with it ,but as I would say in government offices it is a head thing ,if it ain’t come from somebody senior it is not the solution.

  3. jr smith March 27, 2015 at 7:01 am

    When are we going to find professional people to manage this type of department. Vat is as like to fraud, but why no prosecutions , they are not all friends are they. Why cant Barbados /Bajans manage our Island. Year upon year this micky mouse failing of local and upper levels of public service departments is a continuous happening.
    We must find foreign professionals people to put things right in Bim.

  4. DAP March 27, 2015 at 9:03 am

    So you all play that you all do not know that we bajans do not like to pay bills,just like how we do not like to work and run to the doctor every second and get sick leave,collect NIS even though we know that we not sick and collect free medication which we end up not taking because we were not sick just fed up of work so we end up throwing them away,,so you all see we are part of the problem so until we have a system in Bim like countries in the outer world, like if you do not work you would not get pay things will never get better in Bim and we will always be blaming who ever Government in power.

  5. Kevin March 27, 2015 at 10:01 am

    When government clamps down on some businesses for the VAT owed, what do the owners say. If we pay the VAT, we will have to close the business and send home the workers and yadda yadda. So I guess the governments over the years is chosing the lesser of two evils and giving the businesses a chance to pay the VAT. They had amnesty on top of amnesty, but they are still not paying. Something needs to be done.


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