A Guy’s View: Tax clearance certificate confusion

“8A. (1) Where an application is made to the Commissioner for a tax clearance certificate and the Commissioner is satisfied that

(a) no taxes are due under the taxing Acts;

(b) all taxes, interest and penalties which have accrued under the taxing Acts have been paid; or

(c) an amount satisfactory to the Commissioner that is equal to not less than 10 per cent of the taxes, interest and penalties which have accrued under the taxing Acts has been paid and an agreement has been executed with the Authority for the purpose of making scheduled payments to liquidate the sums owed,

the Commissioner shall issue the tax clearance certificate.

(2) Notwithstanding paragraph (c) of subsection (1), where an application is made to the Commissioner for a tax clearance certificate to facilitate a conveyance of land, an applicant shall

(a) pay all tax, interest and penalties which have accrued under the Land Tax Act, Cap. 78A;

(b) repay all input tax in accordance with section 48(4) of the Value Added Tax Act, Cap. 87, where such tax was previously allowed under section 46(2) of that Act; and

(c ) pay an amount satisfactory to the Commissioner that is equal to not less than 10 per cent of the taxes, interest and penalties which have accrued under the other taxing Acts and execute an agreement with the Authority for the purpose of making scheduled payments to liquidate the sums owed under those Acts.”

These two paragraphs have created quite a scene in Barbados in recent weeks. The furor is a depiction of how we feel about starving the Government of all resources, even what is legitimately owed to it, and the thirst for being objectionable.

These paragraphs are a part of the Barbados Revenue Authority (Amendment) Act, 2017-10, an Act to amend the Barbados Revenue Authority Act, 2014-1. All this amendment seeks to do is to have persons who owe taxes, pay those taxes.

It does not raise any new revenue. It simply lists four other Acts, which are described as the taxing Acts, and says that if you owe monies under those Acts, you need to pay them before you go on to accumulate more debt or simply forget that you are indebted to the state.

The taxing Acts are the Excise Tax Act (2015-32), the Income Tax Act, Cap. 73, the Land Tax Act, Cap. 78A and the Value Added Tax Act, Cap. 87. These are the sources of much of the revenue which runs our country. If the sums owed under these cannot be collected, those whose desire it is to deconstruct the state will have their wish, for it will all collapse.

The tax clearance certificate is no more than a declaration that the bearer has satisfied the Barbados Revenue Authority that he or she has either paid their taxes, or have agreed to do so. Agreement to pay is an important point here.

In adopting a position of compromise, the Government has made provision for persons who either do not have the funds they owe the state, or are unwilling to pay the due amount at the set time, to enter into an agreement with the Authority to pay just 10 percent of the amount owed, and further agree to liquidate the balance over time. Objection to this could only mean that persons are of the view that taxes should not be paid or collected.

The certificate, after stating an identifying number and date, simply says words to the effect that, “This is to certify that JOHN DOE has complied with all the relevant provisions of the Income Tax Act, Cap. 73; Excise Tax Act, 2015, and the Value Added Tax Act, Cap. 87. I confirm that to date there is no tax due or outstanding. However, assessments made are subject to review (emphasis added).

A separate clearance is issued for the purposes of Section 13 (b) (iii) of the Property Transfer Tax Act, Cap.84A.

This Certificate is valid for SIX months and will expire on ….”

I emphasised the statement that assessments made are subject to review because, at best, it creates confusion, and at worst, it may be unlawful. Therein lies the difficulty. I do not know whether this was one of the directives of the Minister of Finance, but I doubt it. The empowering Act makes no provision for the Barbados Revenue Authority, or the Commissioner, to review an assessment. The onus is on the Authority to ensure that their review is correct the first time. They cannot give an applicant a certificate giving him a clean bill of health and then say, oops, we made a mistake. The certificate is intended to be a statement of fact on which persons dealing with the applicant are expected to act with confidence. The idea that an assessment is subject to review injects unnecessary and possibly unlawful uncertainty into the process.

This opens the door for the Authority to take action against property for funds owed to the Authority, after declaring that no funds were owed. If a tax payer owes the state money, a judgement may be had against him and his property. If the property is sold and the Authority takes what is owed to it first, there may not be enough left over for the mortgagee, or lender, to recover its funds. This would be unfortunate, especially when that same Authority would have given a comfort letter stating that the applicant did not owe the Revenue.

The easy solution is the removal of that offending sentence from the clearance certificate, and for the assurance to be given that later indebtedness of the applicant will have no bearing on agreements or contracts entered into on the basis of the declaration of compliance with the taxing Acts in the certificate.