The Trinidad and Tobago Chamber of Industry and Commerce was pleased to hear Minister of Finance Colm Imbert refer to the matter of paying VAT refunds during the Q&A segment of the Ministry of Finance's press conferences on May 10 and 21. We now look forward to further details on how the outstanding refunds will be addressed as some businesses stand on the brink of closure and need the monies legally owed to them as soon as possible.
We have actively engaged the minister on this matter since the end of 2017 and wrote him again over two weeks ago. Since 2018, various possible solutions have already been proffered to the government. Being cognisant of the State's cash flow challenge coffers, the chamber proposed the following:
• Issuance of a certificate or some similar document when VAT refunds become due (without giving a commitment to a payment date) and making a commitment to the interest as set out in the Value Added Tax Act Chapter 75:06 (VAT Act). This will allow the company to approach their bankers for loan facilities to match the amount owed by the BIR and fund the increased cost with the interest earned.
• Allow companies to offset the refunds owed to them with VAT and/or tax payments due based on the BIR's confirmation of the refund amount. While this is not currently allowed in existing laws, the current situation is untenable.
• With specific reference to the manufacturing sector, we recommend:
- Implementation of a VAT exemption on raw material inputs for manufacturers; and/
- Implementation of a VAT exemption on raw material inputs for manufacturers who have a level of exports which results in consistent VAT refunds; and/or
- Offsetting of overdue refunds against VAT payments for imports of raw materials; and/or
- Offsetting of overdue VAT refunds against all VAT payments due when filing a VAT return; and/or
- Removal of VAT on raw materials for companies which have zero-rated manufactured products for local sale.
In the 2019 budget presentation, the Minister of Finance stated, 'I would ensure that VAT refunds are put on a current basis which would lead to regular cash flows for business investment, greater economic activity and the avoidance of the evasion of value added tax.' He also committed in the 2020 budget to a VAT bond issue of '$3 billion, in the first instance' to all eligible businesses to meet VAT arrears.
Approximately $3.5b of the $6.2b has been settled last year. On May 21, the minister further indicated that approximately 98 per cent of refunds to small businesses have been paid. However, the feedback from our members indicates that a large number of refunds are still outstanding and the amounts continue to increase.
Additionally, the interest due by law was not paid and once again businesses are reporting that the payment of refunds is not being kept current. The VAT Act states that refunds due from government which are not paid within six months will attract interest one per ce
