The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s owner has described initial Value-Added Tax (VAT) compliance rates as “very impressive”, amid hopes there has been “a paradigm cultural shift” in attitudes towards paying taxes.

Rupert Roberts said it was “unbelievable” that monthly VAT filers had achieved a consistent 90 per cent compliance rate, and quarterly filers a first-time 80 per cent, given that sophisticated accounting systems had not been used widely in the private sector.

“That’s unbelievable,” he told Tribune Business of the compliance statistics, revealed by the Ministry of Finance.

“That the country could perform that well, with no or minimal accounting [history], and could turn around that fast and comply that quickly. It’s very, very impressive that merchants could turn around that fast and comply.”

Many observers felt that VAT’s implementation would impose much-needed discipline on the private sector and country at large, given its enhanced bookkeeping and record-keeping demands.

Besides the upgraded accounting and system requirements, VAT effectively creates an ‘audit trail’ linking businesses. This, in turn, establishes a self-enforcement mechanism that many felt would help drive compliance rates in comparison to other government taxes.

Gowon Bowe, the Coalition for Responsible Taxation’s chairman, agreed that the ‘enforcement trail’ was likely to have boosted VAT compliance rates.

“If their [Ministry of Finance] numbers are accurate, it certainly bodes well...... that we have a high level of compliance, and persons trying to meet the laws and regulations implemented,” he told Tribune Business.

“It’s certainly a paradigm shift from what we’ve seen with Business Licences, real property tax, Customs duties and National Insurance Board contributions. Hopefully, it’s a cultural change where persons are more willing to comply.”

Mr Bowe added that “peer pressure” would also drive VAT compliance rates, as businesses meeting their obligations were likely cease trading with those that did not.

“If you don’t report and don’t file, there is a paper trail leading back to your door,” he warned. “No one wants to run the risk of running afoul of the law. You’re invoicing, receiving them; you almost already have evidence in the public domain of non-compliance.”

A high compliance rate among VAT-registered businesses is vital to the tax’s success in several ways. Apart from being critical to achieving the Government’s revenue, deficit and debt reduction targets, it is also necessary to bolster private sector confidence in the new tax and keep the rate at 7.5 per cent.

Mr Bowe agreed that a high compliance rate was essential to convincing the business community that ‘everyone is paying their fair share’.

“The expectation was always to have a high one [compliance rate], because if it was low we would be running into problems and the Ministry would have to address it through enforcement,” he told Tribune Business. “The expectation was that everything would be done to encourage a high participation rate.”

The Coalition chairman then called on the VAT Unit to publish statistics showing compliance levels for VAT registration, arguing that this would place the filing/payments data “in context”.

He added that it was vital to ensure all companies with annual turnovers exceeding $100,000, and which should have registered for VAT, had done so as the second part of the compliance equation.

“I believe we have a high compliance rate as it relates to registration, but what are the numbers there as well?” Mr Bowe asked. “Are we confident that the statistics on Business Licence revenues have successfully allowed us to identify parties with annual turnovers of $100,000?”

He told Tribune Business it was important for the authorities to show they have their “finger on the pulse, and know how many there are still needing to be dealt with by the VAT Unit’s compliance unit”.