Small business ease

Minister of Finance and Economic Affairs, Christopher Sinckler, has announced good news for the island’s small business sector.

Introducing the Value-Added Tax (VAT) (Amendment) Bill 2017, in Parliament, yesterday, the Minister of Finance said while previously, businesses which earn BDS$80 000 annually were required to register, that threshold has been raised to BDS$200 000.

Minister Sinckler said the move to significantly raise the threshold to omit small businesses from having to register to collect, or pay VAT, was taken because it was believed that the former threshold was too small, given the nature, size and growth of the economy.

“It means that a lot of small business people in Barbados, who are currently now having to battle through with all the paper work on VAT, will not now have to do that so long as they do not reach or surpass that threshold of BDS$200 000 of business being undertaken within a single reported period for the year in terms of their annual accounts.

“That gives an ease because it allows them to have a little bit more cash flow. It allows them to be able to not have to expend resources in areas ... they could then transfer those resources into other areas of the business to grow the business or to do other things,” he said.

The intent of this change is to make the overall administration of the regime easier.

However, persons who are not VAT registered may not reclaim any VAT that they may incur in their operations. These small businesses will not bear this VAT and will likely pass this cost on to consumers.

“In the practice of the VAT, when it was first implemented, of course we recall that a very low threshold was set at BDS$60 000 originally for persons to become VAT registrant and to participate as intermediary tax collecting agencies or tax collectors on behalf of Government. It is a voluntary tax system.”

He continued, “You register if you are in the line of collecting tax on behalf of government. You register officially where your accounts would have to be submitted. You would have to do a VAT filing in relation to what would have transpired in the previous month.

“I believe the filing is done on the 21st day of each month for the period covering the previous month. That is then reviewed by the VAT department and you are then told whether you would get a refund or if you were owing to the government,” the Minister explained.

He further stated that due to the outgrowth of the economy, both in terms of size and the value of business transactions, the economy would
have expanded exponentially.

The Minister said this development then led to a mismatch between the size required for the threshold at BDS$80 000 and the value of businesses and the growth of the economy.

“And because of that mismatch, it meant that a lot of what we call small business people and individuals, who were operating within the economic space, because of the law, are required to register and go through the processes which any other VAT registrant, medium or large size, would have had to go through. . .,” he further explained. (AH)