BUSINESS MONDAY: VAT revenue falling short, says business analyst

WHY is the Value Added Tax (VAT) continuing to underperform where revenue generation is not matching forecasts.

A local business analyst said while the economic situation in Barbados is partly to be blamed, there may be cases where either collections are not being paid into Government’s coffers or forecasting VAT revenues is very faulty.

The analyst drew Business Monday’s attention to the fact that VAT projections are consistently forecast to realise over one billion dollars in revenue. Unfortunately, it has not reached that target.

During the first quarter of this year the Central Bank of Barbados said VAT revenues for the 2020/2021 fiscal year were $706.3 million. For the first three months of this year VAT supplied $187.3 million compared to $262.7 million for the previous financial year.

VAT has not been generating the revenue which Government has been projecting year after year.

Governor of the Central Bank of Barbados, Cleviston Haynes, said that Government suffered a revenue loss of $416 million or five per cent of GDP during fiscal 2020/21.

He blamed this on transaction based taxes, which according to him were especially hard hit, declining by almost $500 million.

The VAT accounted for more than half of the loss, the result of lower imports, including for fuel, and domestic sales and increased refunds.

Information has shown that at the start of the last financial year, Government was projecting over $100 million from VAT and it has done the same thing for the current year which ends at March 31 next year.

The analyst said that in the case of the last year, the COVID pandemic had a negative effect on almost everything in Barbados  given the shutdown and the slowdown in the performance of the economy.

“But prior to that year the situation was almost the same as VAT revenue did not matched the projections,” he pointed out.

In the meantime, the Governor said that taxes on incomes and assets rose by $119 million on the strength of a near doubling of corporate taxes which registered a $304 million increase.

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