The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to postpone plans to make at least some quarterly and monthly filers pay Value-Added Tax (VAT) monthly, a well-known consultant describing this as “an injustice and disservice” to small businesses.

Mark Turnquest, of Mark A Turnquest Consulting, told Tribune Business that it was “too early in the game” to impose such requirements on small and medium-sized enterprises (SMEs), revealing that 90 per cent of his clients did not even have a manual accounting system pre-VAT.

He added that it had been a huge challenge just to convince his clients to implement Quik Books accounting systems, and shift to a more disciplined operational culture in preparation for VAT.

The Government’s proposed amendments to the VAT Act, Mr Turnquest said, would only cause further “confusion” within the SME community as firms continue struggling to adapt to the new tax.

“I know from dealing with my clients that they don’t have the systems in place to do that [pay VAT] every month,” Mr Turnquest told Tribune Business.

“It would be an injustice and disservice to the small business owners. Right now is not the time. Just the ones I’m dealing with now, it has taken six months of convincing them to set up their Quik Books accounting systems so they can be disciplined, and change their paradigm.”

Mr Turnquest told Tribune Business he was having “a challenge” in convincing his clients to file their VAT returns on a quarterly basis, and added: “I have to force them to commit to doing their reports on a quarterly basis.

“The owners are not disciplined the way they are supposed to be, and to force them to do it monthly, there’s going to be a lot of fines and penalties, and a lot of confusion.

“It’s a disservice at this time. It’s too early in the game, and will not benefit the small business owner..... I advise the Government to put it off until next year.”

There appear to be different interpretations, both among top government officials and in the paperwork, over exactly what the proposed VAT Act amendment - requiring monthly tax payments for quarterly and bi-annual filers - will actually entail.

Documents attached to the 2015-2016 Budget communication say the Government plans to “amend the VAT Act to specify that all registrants, including those that file quarterly and half-yearly, pay VAT collected on a monthly basis”.

This suggests that the ‘monthly payment’ requirement will be made mandatory for all quarterly and monthly filers.

However, the language of the actual VAT Amendment Bill suggests that the ‘monthly payment’ requirement will only be imposed on a case-by-case basis, and at the discretion of acting VAT comptroller, John Rolle.

Currently, quarterly and bi-annual filers by law must remit the taxes collected on the Government’s behalf every three and six months, respectively.

Yet the proposed amendments state: “The Comptroller may require a registrant to make interim monthly payments of VAT, and shall reconcile the payments made against the filing of VAT returns.”

This conforms with what Michael Halkitis, minister of state for finance, said last week, as he suggested that the ‘monthly payment’ requirement would only be enforced against VAT registrants who were delinquent, filed late or did not pay the sums due.

Yet Mr Rolle, who is also the financial secretary, appeared to take a harder line, saying: “Some filers could be spared.”

He told Tribune Business: “The approach will based on assessed risk. On monthly payments, the proposal is to strengthen safeguards early on against any build-up in VAT that goes uncollected.

“This would help to avoid the funds being put to other use and not paid. Even if the record-keeping is up to standard, it is important to minimise the risk of the cash being misdirected for working capital.”

Mr Turnquest, though, said SMEs had re-deployed funds normally used for marketing to implement point-of-sale and accounting systems, and the book and recordkeeping necessary for VAT.

He added that many were also still grappling with issues such as the ‘VAT standard rate’ versus the ‘flat rate’ payment method.

“Ninety per cent of the business owners I consult and deal with don’t have an accounting system; not even a manual accounting system,” he added.

“It looks like the Government right now is making a tremendous amount of money. The Government should really be satisfied with the amount of money they’re getting to preserve small businesses.

“VAT is not to be paid monthly because that would kill the small business owners. They will choke the small business owners with this monthly thing. Don’t squeeze the small business owners further without giving them incentives to develop their businesses,” Mr Turnquest said.

“If only they knew what small businesses have to go through to get that three-month quarterly filing together.”