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Trade Minister: Payout of $60m in VAT refunds from February
Trade Minister Vasant Bharath estimates that $50 million to $60 million will have to be allotted to make outstanding VAT refund payments to manufacturers and other business owners. “The manufacturers and supermarkets were obviously not expecting that when they would have purchased goods, maybe six weeks prior, they would have not been able to claim VAT.
They would have been able to claim VAT out of those items, but they would not have been able to claim it back. They were concerned that suddenly their cash flow was going to be suddenly affected and they would not have been able to net off the input against the output,” the minister said to the T&T Guardian yesterday in a telephone interview.
On Friday, Bharath and officials from the Trade Ministry met members of the T&T Manufacturers Association (TTMA) about the effect that the removal of VAT from food items was having on manufacturers. In the 2012-2013 national budget, Government announced temporary removal of VAT on 7,000 food items. The TTMA had complained that manufacturers had been put at a disadvantage because of the haste with which it was done.
The minister said payment of VAT refunds to supermarkets and manufacturers and others who incurred VAT, but were not able to reclaim it, will start February.
In the case of manufacturers who have outstanding VAT payments to make, the minister said: “Some information presented to me shows that some manufacturers have had VAT outstanding since 2008. This is a significant issue because it creates cash flow problems and barriers to trade. It is also an issue pointed out by the World Bank that T&T must resolve. That is a longer-term issue.”
He complained the bureaucracy has allowed a system where there are overlaps between financial years and payments are always owed. “In the past, what governments have done is that they have set aside a fixed amount of pay for VAT refund, regardless of the amount outstanding. So let us assume they set aside $200 million to pay VAT refunds and the official amount outstanding is $300 million, it means a shortfall of $100 million that goes on to the next fiscal period.
“Then, in the next fiscal period, you have situation of $200 million being allocated, then this total is $400, then you have another $200 million outstanding, then you have $300 million cumulatively going forward. So we have had amounts going forward, from financial year to financial year, that goes unpaid. I have committed to working with the Board of Inland Revenue (BIR) and other agencies to ensure that we shore up our collection of VAT,” he said.
Bharath promised that “inefficiencies” in tax collection will soon be cleaned up. “Our collection now is not very efficient and there are a lot of leakages and a lot of taxes not being collected. We need to improve that collection. “I am hopeful by the time the Finance Minister reads his next budget, we would have found a solution to that so VAT is no longer outstanding.”
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