$200m holdup

Banks suspend 300 real estate transactions

Commercial banks have had to suspend over 300 real estate-related transactions estimated at $211 million due to a “lack of clarity” on the processes involved in the issuance of a tax clearance certificate by the Barbados Revenue Authority (BRA).

And President of the Barbados Bankers’ Association (BBA) Donna Wellington has warned that until there was clarification, the financial institutions would not be in a position to close any real estate-related transactions or disburse monies associated with those deals.

As of March 16, 2017, the amended Barbados Revenue Authority Act, opposed by the Barbados Bar Association, demanded that individuals and corporations be fully paid up to all branches of the state before obtaining a tax clearance certificate.

The grouping of lawyers had warned that the measure would have “constitutional implications” and would “cause more mischief than it cures”.

According to the amended legislation, those wishing to obtain a tax clearance certificate to facilitate a conveyance of land, must pay all tax, interest and penalties accrued under the Land Tax Act, Cap. 78A. People are also required to repay all input taxes in accordance with Section 48(4) of the Value Added Tax Act, Cap. 87 where such tax was previously allowed under Section 46(2) of that Act.

Applicants who may not have the means to settle their arrears in full have the option of paying ten per cent of the taxes, interest and penalties which have accrued under the other taxing Acts, and enter into an agreement with the BRA to make scheduled payments to liquidate the sums owed under those pieces of legislation.

The BBA said there was a “ lack of clarity on the processes that are required in order to comply with the Act”.

Donna Wellington

“As such commercial banks have been experiencing significant delays in disbursement of mortgages and other credit facilities that require security over real estate. These delays are currently impacting an aggregate of approximately 330 transactions with an estimated value of $221 million. The failure to close and disburse these transactions impacts not only the banks’ customers but also restricts the transfers of associated property transfer taxes and stamp duties to the Government of Barbados,” Wellington said.

The “interruption” in business associated with the real estate transactions will directly impact realtors, developers, lawyers, contractors, valuators and all other stakeholders involved in real estate related transactions

The issuance of the tax clearance certificate can take up to six weeks, which commercial banks believe was a significant delay that could further impact negatively on the process of doing business in Barbados for both local and international investors.

Wellington said the BRA had agreed to meet with the bankers on May 30, to “discuss and clarify” the concerns and the requirements for properly closing transactions under the Act.

“The association further advises that until such clarification is obtained, commercial banks will not be in a position to close real estate related transactions and disburse monies associated with same,” she said, adding that the association was eager to find a solution that served the interests of all parties, including the public and clients wishing to execute conveyances, as well as generate income for the BRA.

In a swift reaction to today’s BBA statement, the Opposition Barbados Labour Party (BLP) which had previously described the amendment as “kicking Barbadians while they are down”, appealed to the Freundel Stuart administration to “reverse the madness” and repeal the amendments.

Opposition Leader Mia Mottley suggested that it be done as early as Tuesday when Parliament met for the presentation of the Budget by Minister of Finance Chris Sinckler, and promised the BLP’s support.

Mia Mottley

Mottley said the bankers’ grouping’s statement had confirmed what her party had warned all along would have happened, that the amendment “would cause total and complete chaos in the lives of citizens and businesses conducting ordinarily routine transactions” here.

She said BRA was simply ill equipped to carry out the functions and the suspension of transactions was just the beginning.

“This is just the frontline of the problem as other businesses and transactions are already being affected in their ordinary course of business, even though they are not the ones depending on loans but are dependent on parties being able to close other commercial transactions,” Mottley said in a statement.

“These actions therefore stand to affect all households and businesses in Barbados. This speaks nothing of the revenue the Government is depriving itself of not just in Property Transfer Tax and Stamp Duty, but ultimately all revenue emanating from the conduct of legitimate commerce in Barbados.

“We in the BLP have been aware for over a month now of the legitimate concerns of the banking sector and the related professions. The failure of either the Prime Minister or the Minister of Finance to treat to these concerns with the absolute urgency that they demand has resulted in this suspension by the banks of the closing of all real estate related transactions and the disbursement of funds related to the same. It is unacceptable that this matter is to await resolution with a meeting one week away- on no less a day than Budget Day and with the BRA who has no power nor capacity to change policy,” Mottley said.

Source: (NC)

18 Responses to $200m holdup

  1. Nicholas Mackie
    Nicholas Mackie May 24, 2017 at 12:35 am

    Barbados loves bureaucracy even more so than the colonial masters who left us this legacy of red tape

    Reply
  2. Tony Webster May 24, 2017 at 2:19 am

    No surprise; just a perfectly natural consequence of an autocratic, desperate government.
    Why do we place our savings in a bank, or credit union? Principally, for the assurance we can get it back when we so need. Why do all these make loans, secured in the majority of cases, by mortgages? So they can recover lent funds if the customer is financially stressed. To actually sell the mortgaged property, the buyer ( or other bank the customer might seek to turn to), will need to confirm ” no imperfection, or impairment, of good and marketable title”.

    The bill’s Achilles heel was clearly laid out by clear-thinking members of our Bar Association, and it certainly loomed large to this retired banker, but all to no avail: .Goriliphants must get their way, right?
    What’s next? Cud as well go for a “Cyprus solution” and put a tax / lien on bank and credit unions .Go ahead ..pass anudder law….just because you have the authority.

    Pure, unadulterated, concentrated arrogance, exemplified.

    Reply
    • Haskell Murray May 24, 2017 at 1:09 pm

      Tony Webster , you just wrote a bunch of nonsense, this law is long over due and as a matter of fact the only part that should be amended is the part payment clause. All taxes MUST be paid before title can be transferred.
      I don’t know what is the Bankers Association issue but they should welcome this change . Business practices in Barbados are need to be brought into the 21 st century.
      Mia Mottley is a politician looking for votes and she should be honest and call her opposition to this law for what it is , a vote buying ploy. Why should the government be carrying a huge receivable which won’t be paid and will then have to write off.

      Reply
  3. Sharon Taylor
    Sharon Taylor May 24, 2017 at 2:24 am

    Stupse… Pay d damn taxes…. If wunna get wunna conveyances and owe d taxes, after wunna get that paper d gov could sing a hymn a ton…. No one ain’t paying… Doesn’t matter which gov in!

    Reply
  4. Quietly Observing May 24, 2017 at 2:30 am

    SMH. These are the dumbest set of people I have ever seen. April 2017 can’t come soon enough.

    Reply
  5. fedup May 24, 2017 at 2:48 am

    Azzes.

    Reply
  6. Jennifer May 24, 2017 at 4:05 am

    Well clarity and coffers is what we want, don’t we??? Just pay your dues. Mortley – report to coon headquarters.

    Reply
  7. Samantha Best May 24, 2017 at 5:10 am

    There goes Midas again!! She knows everything she surely assisted this Government in its demise. She doesn’t listen and is never open to advice. She knows everything.This is madness! Who sufffers? The people.

    Reply
  8. Alex Alleyne May 24, 2017 at 6:33 am

    IN THE REAL WORLD PEOPLE ARE PUT IN JAIL FOR NOT PAYING TAXES. “Pay-up or shut-up”.

    Reply
  9. Carson C Cadogan May 24, 2017 at 6:36 am

    But what about parties not paying their taxes these people were not paying?

    Does any one care about this?

    The country is run on tax revenue I believe.

    Reply
  10. Carson C Cadogan May 24, 2017 at 7:16 am

    Poor people have to pay their taxes, why is it that rich people think that they should not pay their taxes?

    Reply
    • Milli Watt May 24, 2017 at 10:12 am

      @ Carson not really a fan of yours but people got to pay TAXES THAT ARE LEVIED. I would want to see that certificate necessary for travel.

      Reply
      • jennifer May 24, 2017 at 12:36 pm

        Now that is a killer idea Milli.

        Reply
  11. Bajan First May 24, 2017 at 7:17 am

    A withholding tax type of approach should be used to collect outstanding taxes on properties being sold. The seller receives the difference after all taxes and penalties have been satisfied. We cannot continue to permit some to get away with not paying their dues to the country

    Reply
  12. Samantha Best May 24, 2017 at 9:30 am

    It is not that persons do not want to pay taxes. It is that the particular asset, in this case being the land is free of all encumbrances including the taxes that are fully paid, but those persons owe other taxes. They are not given a tax clearance certificate. Each tax should carry its own tax clearance certificate; that’s the only fair and equitable thing to do. If one owes income tax, seek to recover it, but don’t block the sale of land because income tax or VAT is owed.

    Persons not understanding what the discussion is about should seek clarity before commenting.

    Reply
  13. Milli Watt May 24, 2017 at 10:15 am

    I read the article and I don’t see anything tabled that could counter the legislation. BRA has referenced a piece of legislation upon which it is standing. Stop de long talk and go court

    Reply
  14. Commenter May 24, 2017 at 5:57 pm

    The problem really arises when taxes are owed by someone other than the person trying to do the transaction. If the Bank tries to sell a defaulting customer’s property it cant do so without a clearance certificate for the customer- which it means it needs to pay the taxes itself. Qualified tenants entitled to property cant have it conveyed to them unless they pay the plantation owners taxes. A business partner will lose his part of the Sale proceeds of a property if his partner owed income taxes. A person who gets a judgment against another person cant try to get the Court to sell that person’s property without paying their taxes. Lots of other examples but in addition to all this, set off isnt being applied. So I cant sell my property of BRA says I owe $100 even if I havent gotten tax refunds of $1000 since 2013. Practically BRA simply cant issue the thousands of certificates that will be needed in a timely fashion either.

    Reply
  15. MrHeartless May 24, 2017 at 11:29 pm

    On a point of clarity:

    The issue is not that banks and lawyers do not want people to pay taxes, that is absurd.

    The reasons why this is a problem right now is the obfuscation it has created for the following reasons:

    1) BRA lacks the resources to process the innumerable requests for these documents which causes a back log and prevents conveyancing and affiliated matters from being completed because;

    2) The Registrar of Titles cannot record a conveyance without the necessary clearances which, even if they are forthcoming are stalled due to the infrastructure being unfit to accommodate the demand and;

    3. The Act itself is not clear as to what it is to apply to (conveyances alone, mortgages, releases, assents so on and so forth), meaning that those who are to interpret it cannot do so in a way that affords them the certainty to proceed.
    – This is a problem because in the event of an issue, no one can correct it or clarify it because it is by its very nature, unclear.

    4. The Land Registry itself does not know what and when these clearances are required meaning that documents cannot be processed in a timely manner as everyone is hesitant.

    5. The Act does not cover a number of outlining situations – for example, if a resident was never registered to begin with or in the case of non-nationals who have never step foot in Barbados.
    – The Act requires that ALL classes of people get these tax clearances even when they are not applicable which leads to further confusion as to how to deal with these persons to whom the Act does not apply.

    6. There have been no directives or guidelines, no concessions or lee-way with respect to how to deal with circumstances which do not fall within the four corners of the stated law, which as you could understand, would result in meaningless gridlock.

    So as you can see, it is erroneous to view this as banks and lawyers not wanting people to pay taxes. The problem is not in the payment or non-payment of taxes it is in the lack of infrastructure and clarity needed to have the process run in an unobtrusive manner which has not been the case since the Act’s inception and has had the opposite effect of grinding business in that sector to a halt.

    Banks, who are all about the bottom line, would not pull the brakes on one of Barbados’ top money earners both for private entities and the Government alike, for something as frivolous as wanting to assist random people in tax evasion.

    It’s time to wisen up people and look at things objectively for the good of our ailing country, things work and play out much different from a practical standpoint than they do on paper.

    Reply

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