An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

De­layed val­ue-added tax (VAT) re­funds con­tin­ue to tie up man­u­fac­tur­ers’ cash flow, lim­it­ing their abil­i­ty to in­vest in equip­ment, ex­pand pro­duc­tion and strength­en ex­port ca­pac­i­ty, the Trinidad and To­ba­go Man­u­fac­tur­ers’ As­so­ci­a­tion (TTMA) has warned.

At its post-bud­get fo­rum at the Hy­att Re­gency Trinidad yes­ter­day, the TTMA ex­am­ined the im­pli­ca­tions of the Gov­ern­ment’s fis­cal mea­sures on lo­cal busi­ness­es.

Fi­nance Min­is­ter Dav­en­dranath Tan­coo, who was the fea­tured speak­er at the fo­rum, did not at­tend, with TTMA pres­i­dent Emil Ramkissoon ex­plain­ing that oth­er crit­i­cal na­tion­al is­sues had arisen.

The min­is­ter’s ab­sence af­fect­ed the at­mos­phere at the event, but the dis­cus­sion con­tin­ued with the pan­el that was ad­ver­tised.

A What­sApp mes­sage was sent to Fi­nance Min­is­ter Dav­en­dranath Tan­coo seek­ing com­ment on his ab­sence, but he had not re­spond­ed up to press time.

Sev­er­al gov­ern­ment min­is­ters were present at the open­ing of the new ANR Robin­son In­ter­na­tion­al Air­port in To­ba­go yes­ter­day.

Ramkissoon stressed that VAT re­funds were mon­ey owed to man­u­fac­tur­ers, not a con­ces­sion from the State.

“A VAT re­fund is not a favour to a man­u­fac­tur­er. It is mon­ey that be­longs to the busi­ness,” he de­clared.

De­layed re­funds re­move mon­ey from com­pa­nies’ cash flow that could oth­er­wise fi­nance ma­chin­ery, plant up­grades, tech­nol­o­gy, in­ven­to­ry, em­ploy­ee train­ing and ex­pan­sion. Time­ly pay­ments, he ar­gued, would al­low man­u­fac­tur­ers to in­crease pro­duc­tion, de­vel­op ex­port ca­pac­i­ty and gen­er­ate for­eign ex­change.

The TTMA has con­sis­tent­ly ad­vo­cat­ed time­ly VAT re­funds, in­clud­ing a sys­tem to pre­vent ar­rears from ac­cu­mu­lat­ing and ex­pe­dite pay­ments to ex­porters.

Ramkissoon wel­comed the Gov­ern­ment’s pro­pos­al for a mod­ernised VAT regime in the 2026/2027 bud­get, con­trast­ing it with the sales tax pro­pos­al men­tioned in the pre­vi­ous fis­cal year’s bud­get. How­ev­er, he warned that man­u­fac­tur­ers could not con­tin­ue wait­ing for a res­o­lu­tion to the long­stand­ing prob­lem.

Treat­ment of tax loss­es

EY Caribbean tax part­ner Col­in Ram­sey al­so cau­tioned that changes to the VAT sys­tem could have sig­nif­i­cant im­pli­ca­tions for busi­ness­es, par­tic­u­lar­ly if sup­plies pre­vi­ous­ly ze­ro-rat­ed were moved in­to the ex­empt cat­e­go­ry.

Ram­sey ex­plained that ze­ro-rat­ed sup­plies re­mained com­mer­cial trans­ac­tions for VAT pur­pos­es, al­low­ing reg­is­tered busi­ness­es to re­cov­er in­put VAT in­curred in pro­duc­ing or sup­ply­ing those goods.

VAT-ex­empt sup­plies, how­ev­er, did not pro­vide the same en­ti­tle­ment. Busi­ness­es sup­ply­ing ex­empt goods could not re­cov­er in­put VAT or im­port VAT in­curred in gen­er­at­ing those sup­plies, po­ten­tial­ly in­creas­ing op­er­at­ing costs.

“That now cre­ates an ad­di­tion­al cost to the busi­ness­es where the goods are re­cat­e­gorised from be­ing ze­ro-rat­ed to ex­empt,” Ram­sey ex­plained.

He al­so point­ed to the ad­min­is­tra­tive bur­den on com­pa­nies sup­ply­ing both tax­able and ex­empt goods, which must ap­ply a for­mu­la to de­ter­mine the pro­por­tion of in­put VAT they can re­cov­er.

Ram­sey fur­ther ad­dressed the pro­posed re­stric­tions on cor­po­rate tax write-offs, in­clud­ing lim­its on the use of tax loss­es to off­set tax­able prof­its.

While the mea­sures would bring T&T clos­er to tax struc­tures used by re­gion­al neigh­bours such as Ja­maica and Guyana, he warned that lim­it­ing tax write-offs could tight­en cor­po­rate liq­uid­i­ty at a time when busi­ness­es need­ed cap­i­tal to ex­pand and in­crease ex­ports.

Econ­o­mist Dr Dave Seer­at­tan, who par­tic­i­pat­ed in the dis­cus­sion, ob­served that VAT re­funds had re­mained an im­por­tant is­sue for years.

He not­ed that Tan­coo had pre­vi­ous­ly raised the pos­si­bil­i­ty of re­plac­ing VAT with a sim­pler sales tax sys­tem, al­though tran­si­tion­ing to a dif­fer­ent tax struc­ture would be time-con­sum­ing and dif­fi­cult for busi­ness­es and the Min­istry of Fi­nance.

Seer­at­tan al­so point­ed to the in­ter­na­tion­al pref­er­ence for VAT as a tax in­stru­ment, ar­gu­ing that the ad­van­tages and dis­ad­van­tages of al­ter­na­tive sys­tems need­ed care­ful con­sid­er­a­tion.

For man­u­fac­tur­ers, the im­me­di­ate con­cern re­mains the time­ly re­pay­ment of VAT owed, which the TTMA be­lieves is es­sen­tial to free­ing up cap­i­tal, sup­port­ing in­vest­ment and im­prov­ing the sec­tor’s ca­pac­i­ty to earn for­eign ex­change.