Stephen: Tax clearance issue must be addressed

Economist Jeremy Stephen is warning that if the commercial banks’ concern regarding the tax clearance certificate was not addressed as quickly as possible it could have “quite serious” and far-reaching effects.

Just Tuesday, President of the Barbados Bankers Association (BBA) Donna Wellington warned that until there was clarification on the process of obtaining a tax clearance certificate, 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.

According to the amended legislation, those wishing to obtain a tax clearance certificate to facilitate a conveyance or land, must pay up all tax, interest and penalties accrued under the Land Tax Act and Value Added Tax Act.

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

“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.

Reacting to the development Wednesday, Stephen told Barbados TODAY since a significant portion of the portfolio of commercial banks was made up of real estate loans, the hold up of the estimated $221 million worth of transactions could negatively impact on depositors as well as the economy.

“The effects would be on the general economy and probably would begin to [affect] interest rates. Interest rates on savings should also fall further and as a result also impact on liquidity in the banking system if this is allowed to drag out,” he said.

Stephen explained that if the issue were to drag on much longer it could have a ripple effect, resulting in a lack of revenue for the commercial banks since they would not be getting the fees associated with the real estate-related transactions.

He added that a lowering of interest rates could cause a slowdown in saving and a reduction in personal and other loans.

“If it is that more people begin to take their money out the bank or reduce what they are holding directly in the bank . . . you will have the case where the liquidity could dry up and the banks not only having low interest rates but the banks would not be able to make as much personal loans or other loans outside of real estate because the liquidity has dried up somewhat,” Stephen explained.

“Additionally, given the fact that banks are now mandated to hold 15 per cent of their deposits in Government paper, you can really see the case where . . . that part of the portfolio may become a bit more useful in the near term in terms of generating revenue. That presents an increased risks to the banks given the shakiness of the interest rates on the debt burden that Government currently has,” he added. (MM)

6 Responses to Stephen: Tax clearance issue must be addressed

  1. Tony Webster May 25, 2017 at 1:58 am

    Deja vu, in spades!! The world’s great issues remain; all the world’s a stage; it’s just the actors that change! Why are we forcefully reminded of Shylock’s infamous “Pound of flesh”… and how Portia, so wisely and so well, wielded her Sword of Equity, to ultimate triumph?

    The Bard himself must be having quite a chuckle, at our expense. To us citizen-taxpayers, however, these misguided antics are no joke. Thanks be to God, I owe Shylock not a red cent, but Shylock yet owes me the burial grants for both my dearly-departed parents: one, from 1995; the other from 2003. Verily.

    Reply
  2. Jennifer May 25, 2017 at 4:17 am

    Damn if you do and damn if you don’t. The axe is laid to the tree, shaking the leaves and knocking off much useless fruit. Oh the dobermans.

    Reply
  3. Peter May 25, 2017 at 10:01 am

    This reject from England HAS to be a vampire. Look at the time of her post, before sunrise. She has to go back to her grave before daybreak. Damn old blood sucking witch. Writes in parables because she cannot anything that makes sense. Daughter of darkness….

    Reply
  4. Milli Watt May 25, 2017 at 12:44 pm

    stupse……….this explanation is your weakest I have read to date by you. This forces a class of persons in the society to pay their TAXES. There is nothing illegal with the move if it were court would be opened by now. This has to do with a group who believes they can operate above the rest. The minister ain’t SPECIAL in my books but he has a point. This has got to be the balliest move I have seen to date with regard to making a decision based on economics and standing by it.

    Reply
  5. Milli Watt May 25, 2017 at 12:49 pm

    As for you Jeremy I am not surprised you need to keep from round that crowd they clouding your judgement. Banks create money based on debt to lend in areas that are not in line with government. The expansion of the money supply in areas and by amounts that can debilitate a country should be frowned on. Banks in this country are known for that and don’t tell me bout protecting depositors money you just don’t hear bout the amounts written off and to whom. PAY YOUR TAXES because I got TO PAY MINE.

    Reply
  6. Haskell Murray May 25, 2017 at 9:59 pm

    I would like to know where these lawyers got their legal training. What clarity you want , it is very simple issue the taxes MUST be paid before title can be transferred. In other words when you prepare the statement of adjustment you deduct the taxes owing from the selling price and send it to the government don’t keep it.

    Here is an example:
    Dr Cr
    Selling price ……………………………………….. 100,000

    Adjustments:

    Real estate taxes…………. 2,000

    Water ……………………….. 1,000

    Legal fees ……………………..1,000

    Balance ………………………96,000
    ———– ————
    100,000 100,000
    ====== ======

    Reply

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