It’s tax return time again in Barbados, and the heavily-taxed middle income earners in the country may be about to get another shock to their wallets.
Those taxpayers in the middle-income category, who undertook a major loan to acquire their own home, and were forward-thinking enough to plan for retirement by taking out a retirement income policy, are already feeling the pinch from increased taxes from 2015. That’s because the Minister of Finance removed tax deductions for home owners’ expenses like mortgage interest, insurance, and home repairs ($10 000 per annum), and for Retirement Income Plan premiums ($10 000 per annum), which had been in place for decades, in one form or another, as a policy incentive to encourage home ownership and savings.
For the typical middle-income earner, those deductions probably entitled them to a tax refund last year, which, of course, they are still waiting for, and they may be thinking that if they have to pay tax this year (and the odds are that they will, as the loss of $20 000 in deductions translates to $6 700 more in tax at the higher band, or $3 200 at the lower band), they’ll be able to set it off against their refund, and either receive or pay the difference.
Think again! According to senior officials in the Barbados Revenue Authority (BRA), that’s not going to happen. They insist that the system is incapable of facilitating the set-off of 2014 and earlier refunds due against a tax payable in 2015. The official line – from several different BRA sources – is that taxpayers must pay at least 50 per cent of their 2015 tax obligations by April 30, 2016, and if they do not, then both a penalty and interest will be enforced. When asked whether the tax refund in those cases would be expedited, the response was that if taxpayers were lucky, they might get their 2014 refund checks by September 2016, before the other 50 per cent of the 2015 tax will be payable. However, Minister Christopher Sinckler, during the recent debate of Estimates of Expenditure and Revenue for the financial year 2016-2017, noted that the processing of refunds was almost complete and they would be paid as soon as the Barbados Revenue Authority received monies in hand.
We are of the view that this is illogical, because the system had previously been amended to facilitate set-off of consolidation tax against any refunds due. The Government should have paid 2014 tax refunds long ago, but claim, inter alia, that reduced revenues have made it impossible to settle their debts as they come due (the definition of insolvency, incidentally). At the very least, surely a caring Government would be expected to facilitate the set-off of tax refunds owed for previous years against sums owed by the same taxpayers currently? Perhaps there is some respite for the taxpayer. According to Section 68 (1) of the Income Tax Act: “Where the amount paid by a person as tax, interest and penalties for an income year is in excess of the amount payable in accordance with this Act by that person for that income year and where that person applies to the Commissioner, in writing, for a refund of the excess within three years after the date of his notice of assessment for that income year, the Commissioner shall apply the amount of that excess against any outstanding liability of that person under this Act and cause the balance, if any, to be repaid to that person.”
Of course, there are scores of small, medium and large businesses who have experienced and been severely disadvantaged by the similar situation that has obtained for VAT for years now – despite being owed substantial refunds for VAT, they still have to pay VAT monthly on ongoing transactions, with no hope of set-off.
Thousands of cash-strapped Barbadian taxpayers will no doubt be watching anxiously to see whether the matter is resolved before April 30, and perhaps to judge whether the Government is prepared to allow financial bankruptcy to govern their morals.
The Government should seek to collect the funds owing to them, especially the VAT from VAT-collecting agencies. It is about time they publish and expose those who are taking advantage of facilities that the system has put in place.
The Publisher of the Barbados Advocate