The Small Business Association of Barbados recently used its webinar series to engage the Barbados Revenue Authority (BRA) in preparation for the April tax season and to sensitise the business community about a number of tax-related measures.
Government’s chief tax administration agency is often seen as a labyrinth particularly for small firms whose owners do not have the resources to contend with delayed refunds, unannounced regime changes and the concomitant penalties for noncompliance, and the lack of customer facing mechanisms to address issues from the public. As such the engagement with the agency was intended to remove the proverbial maze.
The Revenue Commissioner provided good context of the operations of the BRA in appreciating the significant role played as government’s main tax collection department. The agency records annual tax revenue of over BDS$1.9 billion. Several objectives articulated for the organisation included stabilisation, growth and transformation. In seeking to be recognised as a good employer, the BRA continues to upgrade its digital interfaces, its people platform, and healthcare for its staff.
The business community was introduced to various online portals intended to make the tax filing process more customer friendly. An example was the land tax portal where payments can be easily facilitated and applications for land tax certificates accessed. Also available electronically are pensioners rebate forms, the hotel and villa rebate form, the objection form, and the ministerial waiver form. Effective April 2023, the BRA discontinued paying refunds by cheque, all refunds are now paid by Direct Deposit.
With these improvements in technology and access to information, participants raised an obvious question – what is contributing to the outstanding payable of over $1.8 billion due by taxpayers. While no figure was given for refunds due by the BRA, there should be a regime implemented to provide an offset to taxpayers in the same tax category. Further analysis is needed in this area to reduce the huge receivable on the books of the agency.
Relative to the self-employed and sole traders, a Certificate of Registration and Application for Registration from CAIPO is required once they have a business name, and the taxpayer registration for Incorporated Entities was also reviewed.
Self-employed individuals should maintain proper books and records of all business transactions, must keep a separate bank account for the business and register with BRA for all applicable taxes. A tax return is required to be filed annually whether or not the business makes a profit.
Referencing the Income Tax Act, Section 2, dealing with the Requirement to File, it was noted that every company and every person who has carried on a business in an income year, whether or not an assessable income has been derived by that person or company in that income year, shall deliver to the Commissioner a return of the assessable income for that income year, together with such additional information as is prescribed, on or before the due dates.
Tax obligations listed included corporation tax, withholding tax, value added tax, PAYE, personal income tax, product development levy, and room rate levy.
Tax compliance was again underscored as an important cog in the wheel of an efficient economy as it keeps the country’s systems working by collecting the revenue needed to fund services provided by the government. The benefits of being tax compliant include avoidance of penalties and interest, additional expenses like legal fees, and prosecution, as failure to file is an offense. Being tax compliant also results in improved knowledge of financial affairs and records and provides useful information for planning and policy.
Often not discussed are the taxpayer’s rights – the right to a fair system administered in an even-handed manner, privacy and confidentiality of their information, and an appeal to an Independent Tribunal against any assessment of the BRA.
The new tax rate of 5.5% for small businesses from income year 2024, was also discussed, with an understating that the Ministry of Business will be automating the registration for Approved Small Businesses status.
While the engagement was informative for stakeholders, the session did leave several issues for further resolution.
- Why can’t firms set off their payable against the refund due by the Authority in the same tax category?
- While payment using a credit card is welcomed, the system does not allow for payments of any amount. Individuals must refer to their banking partner to have their accounts debited.
- Should there not be a review of the Value-Added Tax threshold to remove the high administrative cost for the Authority and small businesses alike, in collecting meager VAT contributions?
- Why is there not a provision for small businesses to use the information in their filing with the agency to verify their status to benefit from the tax rate of 5.5%?
- When will the taxation on pensions be discontinued? This is akin to double taxation and is disadvantageous to seniors who otherwise should be allowed to enjoy the fruits of their labour in their twilight years.
While these issues will warrant a policy intervention and are not the remit of the BRA per se, the agency should also consider its advocacy role relative to tax policy to further contribute to an effective tax regime.
Barbadians by nature are law abiding and are not deliberately recalcitrant in honoring their statutory obligations. The tax regime can be more efficient if greater effort is made at enabling policy and procedures that are facilitatory more so than punitive.
