The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The first Value-Added Tax (VAT) returns are “flowing in”, even though just 12.7 per cent of the anticipated 550 January filers had submitted their documents by Tuesday this week.

John Rolle, the acting VAT Comptroller, yesterday said he expected the rate of VAT return filings to “increase on a daily basis” throughout this week, while warning businesses - who have just three working days to complete the process - to allow two days for their payments to reach the Government.

He added that the 550 monthly filers were projected to collect “at least half” of the Government’s VAT revenues, making them key to ensuring the tax’s success and that revenue targets were achieved.

“We’ve started to see businesses make their filings, and we’re on standby in case any of the registrants encounter any issues with the system,” Mr Rolle told Tribune Business.

“We’ve been seeing the returns flow in, and people are taking advantage of every day in the period. We expect as this week progresses to see the returns increase.

“Up to yesterday, about 70 businesses had filed. That rate will increase on a daily basis in terms of the incremental number of businesses. Between today and Friday, we will be monitoring to see how rapidly it changes.”

The VAT Act stipulates that registrant businesses have until 28 days after the relevant period end to file their returns, and make due tax payments, to the Government.

But, with the 28-day deadline for January’s filings falling on a Saturday, monthly filers have been given until Monday, March 2 to complete the process and submit the Government’s revenues.

Mr Rolle told Tribune Business that the VAT Department was “expecting about 550 businesses” to file monthly returns for January, a number equivalent to 9.2 per cent of its total 6,000 registrants.

In percentage terms, this figure is under one out of every 10 VAT registrants, but the VAT Comptroller explained that this was because monthly filers are expected to largely be the very large businesses with annual turnovers exceeding $5 million.

However, Mr Rolle, who is also the Ministry of Finance’s financial secretary, said “a little more than 100” monthly filers had annual revenues below that $5 million figure.

He explained that these companies had voluntarily chosen to file/pay on a monthly basis, and said it was likely many would ultimately switch to submitting VAT returns less frequently to lessen the administrative demands this will produce.

“Those are registrants who are in the system to file on a monthly basis,” Mr Rolle said of the roughly 100 registrants with turnovers below the mandatory monthly filing threshold.

“We will not be surprised if during this process some of those smaller businesses in that group make a request to settle into the less frequent category.”

The VAT Comptroller, meanwhile, urged January return filers not to leave the process of submitting tax payments to the Government until the final day, as it may not be received by the March 2 deadline.

This would leave those businesses exposed to potential fines and sanctions, and Mr Rolle warned: “It is very important for businesses who are submitting their returns to complete them and initiate payment through their banks.

“In our system, it make two days for payments to reach the Government. What is important is for VAT registrants to build in time to ensure their payment reaches us.

“We already see businesses are sending in their returns, so a lot of them have moved to the next stage, making the payment.”

Mr Rolle told Tribune Business that while the VAT Unit had made no projections about the total revenues it would collect from January, the 550 filers would likely collect most of the taxes due to the Government.

“We haven’t done a forecast,” he added, “but it is anticipated that this proportion of businesses is where most of the VAT revenue will be concentrated.

“It’s not to say those other businesses will not generate a significant amount, but this proportion of businesses [the 550] could generate at least half of the VAT revenues.

“I’m saying at least half, given that we have such a large number of small businesses. We will have a greater contribution from smaller businesses than would normally be the case.”

Prime Minister Perry Christie, in his mid-year Budget address, suggested that large and very large businesses - with turnovers exceeding the $5 million threshold - would collect between 70-80 per cent of the Government’s VAT revenues.

Mr Rolle, meanwhile, disclosed to Tribune Business that the Government will be “encouraging” VAT registrants due to file their returns on either a quarterly or bi-annual basis to submit due payments to the Government more frequently.

While their filing frequency will not change, the VAT Comptroller said making their tax payments more frequently would stop due taxes from building up in these businesses’ accounts.

And, in turn, this would eliminate the ability - and temptation - for such registrants to misuse VAT revenues for working capital or some other use, as frequently happens with National Insurance Board (NIB) contributions.

“The expectation is that more of the VAT registrants will see the benefits [of this],” Mr Rolle told Tribune Business. “We are going to be recommending and encouraging them to make more frequent payments on their account, and still file returns on a quarterly basis.”

This approach will apply to registrants with annual turnovers of between $400,000 to $5 million (quarterly filers), and $100,000 to $400,000 (bi-annual filers).

Mr Rolle said this was designed to help registrants “avoid that temptation” of misusing due VAT revenues, and instead recognise a liability was accruing.

He added of the more-frequent filing approach: “In many cases, it’s actually preventative.”

The VAT Comptroller then told Tribune Business that the ongoing January filings would provide “a good test” for the Department, helping it to prepare for April when the first quarterly filers were due to submit.

Mr Rolle said “at least 5,000” of the Government’s estimated 6,000 VAT registrants - around 80 per cent of the total - would be submitting returns then, representing a huge volume and workload increase for the VAT Department.