Banks won’t take up VAT payments to hotels

The island’s bankers have shot down a proposal by the Barbados Hotel and Tourism Association (BHTA) that would guarantee timely settlement of Value Added Tax (VAT) refunds to hoteliers.

The Barbados Bankers Association (BBA) said the factoring programme – through which the banks would pay the VAT refunds to hoteliers and collect the outstanding monies from the Barbados Revenue Authority (BRA) some 90 days later – was doomed to fail because the banks had no confidence in Government’s ability to pay on time.

“The problem is that it is supposed to be a 90-day facility. Who has just been waiting for VAT for 90 days?” BBA President Donna Wellington today asked the BHTA’s first quarterly general meeting at the Hilton Barbados Resort.

“If you have been waiting for longer than 90 days, after 90 days the facility lapses and the guarantee then becomes one that is due for payment. What is the probability of that happening? 100 per cent, right?”

The BHTA has complained that its members are owed tens of millions of dollars in VAT refunds, money that is critical for their operations.

Donna Wellington & Roseanne Myers

The grouping of hotels and tourism facilities said it was still in the process of assessing just how much the BRA owes its members and for how long.

However, its finance committee is proposing to initiate discussions with the banking sector here about a possible factoring programme similar to that provided for the small business sector.

Chairperson of the BHTA Roseanne Myers said it was the association’s “vision” that commercial banks, on behalf of Government, would provide the amount owed to the hoteliers in VAT refunds, since the banks were considered “flush” with cash, and would later collect that money from Government.

However, Wellington said the banks had a responsibility to depositors “to not do loans that we think are going to go bad” or not to lend to those they believed would not be able to pay.

“If I know that the probability of something going bad is 100 per cent, should I do it?” she asked.

The Central Bank of Barbados currently offers a Value Added Tax Receivable Liquidity Facility (VRLF) for small businesses, which do not include hotels, given the terms and conditions of the facility.

Among the criteria, the VRLS is available to small businesses as defined under the Small Business Development Act or other businesses which satisfy any two of three other criteria – the business must have no more than $1 million as stated or paid up capital, no more than $2 million in annual sales and no more than 25 employees.

The Central Bank facility guarantees payment on credit from $3,000 to $50,000 for any one VAT refund and shall not exceed $100,000 for any one business.

However, a persistent Myers insisted the programme can work for hoteliers if the lending institutions were willing to use the Central Bank’s facility as a guideline, with some changes, including lengthening the credit period from 90 days and increasing the guaranteed amount.

In addition, she said “because the banks have a lot of money, we are saying to them the interest that would have accumulated for the three years we have been waiting you can have that. Well, it is a matter of how much confidence the bank has in whether they will get their money or not, right?”

Acknowledging that the BRA had a cash flow challenge, BHTA Chief Executive Officer Rudy Grant said the association would also consider holding talks with the National Insurance Scheme “to explore the options that may be available as it relates to offsetting the VAT monies owed against NIS requirements”.
marlonmadden@barbadostoday.bb

13 Responses to Banks won’t take up VAT payments to hotels

  1. Sean R. Phillips
    Sean R. Phillips March 9, 2017 at 2:40 am

    This is so very sad… As much as the DLP and primarily the PM try to down play the significance of the island’s downgrade under their leadership, it speaks volumes that the island’s banks don’t even have confidence in the island’s ability to pay. Barbados is flaunting with disaster and it will not have an happy ending, and to see its business as usual with this PM is quite frustrating…..

    Reply
  2. Veroniva Boyce
    Veroniva Boyce March 9, 2017 at 4:24 am

    What school wunna went to? Wunna think the BANKS stupid! Some of wunna need to go directly back to school. Barbados is definitely run by Form Captains and Prefects.

    Reply
  3. Tony Webster March 9, 2017 at 5:17 am

    Banks are not Charitable Foundations: they are actually, the custodians of our savings. Like, YOUR money, and MY money. You want to sleep well at nite, knowing yu can walk into ANY Bajan bank, and get back your money?

    Hmm…you cud try tapping the credit Unions…. or shutes…I almost overlooked the obvious solution: …why not let the N.I.S. pick-up on this great idea?

    Reply
  4. harry turnover March 9, 2017 at 6:02 am

    Stuart…and this is but one result of the recent downgrade.Banks in YOUR OWN COUNTRY ( not in a metropolitan capital) don’t TRUST wunna.

    Reply
  5. Sunil Brome
    Sunil Brome March 9, 2017 at 6:41 am

    Hello Mr. PM this is a clear example of why you should shut your mouth. While airing the fact that you are not borrowing. You indeed are trying to and you have met the first of many stumbling blocks. Remember the Banks are not local and have no obligation to this country in the face of demise. Continue Mr. PM but this solidifies the concern of many. Please take the Banks position as a eye opener, you are a sick man to just sit back and watch this all unfold.

    Reply
  6. Rawle Spooner
    Rawle Spooner March 9, 2017 at 7:16 am

    Seriously this is laughable can’t blame the banks even though I hate them.

    Reply
  7. Colin Daniel March 9, 2017 at 7:50 am

    What is not being said is that the Banks are now overexposed to the Barbados government and that they can no longer extend credit to them. By providing this factoring facility it would amount to additional financing to government.

    Additionally, why should the banks provide the facility only to this sector. It is a universal problem.

    What would be a more appropriate mechanism is the trading of VAT credits and payments between companies and the banks providing the net settlement position to the BRA.

    Reply
  8. Angus Benn
    Angus Benn March 9, 2017 at 8:01 am

    Why would I pay out money to some if know i will get problems getting it back. I don’t understand what is going on. If I was the finance Minister and I know that I need to borrow money. In order to make things right. But on the other hand the prime minister is saying that he would not be borrowing no money .who is calling the shot. I will resign if I was the finance Minister, I could see that the DLP is not together.

    Reply
  9. Sam Clarke March 9, 2017 at 8:01 am

    WOW!! NOT ONLY THE PEOPLE , BUT THE BANKS HAVE NO TRUST IN GOVERNMENT TO PAY, AND SPECIFICALLY ON TIME. THE GOVERNMENT IS DOOMED.

    Reply
  10. Ernesta Catlyn March 9, 2017 at 9:03 am

    The man was keeping his mouth shut for all these years because he knew that if you ‘speak softly only those closest to you will know how little you know’. Wunna force the man hand and now cussing he?

    Reply
  11. seagul March 9, 2017 at 10:04 am

    The world bank austerity programs are designed to destroy all the mechanism structures for our people’s development and upliftment and keep them enmeshed in poverty and underdevelopment. If we in the Caribbean continue to be satisfied with economies based on tourism and off-shore financial and business services, we will remain forever slaves to those kinds of policies. If we wish to avoid that future, we have to come together in a collective. But our arrogance is our demise.
    It should be made known that these shameless greedy bankers are taking orders likewise the politicians from the international voracious predators. Have we already forgotten the millions of people that were push under the bus by these heartless bankers….

    Reply
  12. M Corbin March 9, 2017 at 11:22 am

    This is such a idiotic suggestion, why should the Banks take the risk with their customers and share holders money for the hotels. It is not only the Hotels that is owed money who should pay the others that is owed Vat. “That guarantee money is going to be worth a quarter of its value just now. Turn up the printing Press”

    Reply
  13. Tony Webster March 9, 2017 at 1:56 pm

    @Colin Daniel: please go to front of the class!! I have myself pointed to the obvious Mexican stand-off, where government owes big numbers to local companies/ employers, and the latter owe similar largesse to government ( in various regards), and no-one wished to be the first to reach for their cheque-book! I therefore suggested the need for off-setting. Apparently, this was either impossible, or too easy….I dunno.

    I agree that your suggestion has great merit, but it’s feasibility would be immeasurably more viable, if only only you had stepped forward sixteen or so downgrades back. Mind you, the margins , nowadays and hereabouts, might be much the more “juicier”..n’est pas? Me? Fortunately, I don’t have several tens of
    millions languishing in local banks , earning 0.0005% p.a., and am therefore impervious to such temptations.
    Bon chance!

    Reply

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