22 per cent VAT
New plan for collecting phone tax
Government is going ahead with its plan to impose a new tax on cell phone use, but via a different route.
Minister of Finance Chris Sinckler has proposed a 4.5 per cent rise in the Value Added Tax (VAT) on cell phone service, to take effect from January 1, 2016, raising the tax from 17.5 per cent to 22 per cent.
Sinckler, who made the proposal to Parliament at the end of last night’s sitting, admitted it would result in higher bills.
However, he told Barbados TODAY Government’s initial plan for a three cent tax on mobile airtime made during this year’s Budget presentation was proving too difficult and expensive for the telecommunications companies to implement.
“Subsequently, at the request of cell phone companies and others, we met with them to look at that excise. [During the meeting] it was felt that given the way in which the billing structure for the companies is done, it would mean an additional cost to them to do a new billing system to accommodate the new excise at three cents.
“They also indicated that they would prefer if it were a percentage, rather than a real figure. It was recommended that the easiest and cleanest way to do this would be to do an increase on the VAT, because VAT is already charged on those services,” Sinckler said in an interview this afternoon at the St Leonard’s Boys School where he was attending the final of the St Michael’s Battle of the West Primary School Quiz.
He said the additional tax would raise between $15 and $16 million, but the original plan would have cost Barbadians twice as much.
“People would be happy to note though, because I know that this was going to be a concern that would be raised, that you would have been paying more if we had used the proposal presented in the Budget,” Sinckler explained.
The Minister of Finance disclosed that when the numbers were tallied, it was discovered that some of the losses could be recouped “elsewhere” without having to make any major changes.
“So instead of raising $32 million . . . we will get about $15 to $16 million. It’s about half of the amount and it’s actually less burdensome than it would have been if it were from the original proposal.”
Sinckler argued that the change should come as no surprise to Barbadians because “while it means people will have higher phone bills”, they should have been expecting it from even before with the Budgetary proposals. He added that phone users would determine how much they pay in VAT by the amount of time they spent on the phone.
“It will be of less impact now given what we are doing, but at the end of the day it is discretionary. How much you use your phone is up to you.”
Sinckler announced during his Budget presentation in June that a mobile airtime excise duty on cellular phones would be imposed at a rate of BDS$0.03 (US$0.15) per minute and would take effect from August 1.
With information gathered from the Telecommunications Unit showing that LIME (now FLOW) subscribers used 575.9 million minutes last year and Digicel customers used 514.5 for the same period, Sinckler said the new measure would have generated $32.7 million for the treasury annually.
The telecommunication companies were to collect the tax and pay the funds to the Barbados Revenue Authority (BRA).