ONLINE VAT COLLECTION

One of the measures announced is the collection of VAT on online transactions.  Based on my observation in social media land and general social gatherings’ conversations, one of the biggest concerns is the double-taxing of taxpayers, both online and at the port.  Another big concern is the definition of an online transaction.  This suggestion seeks to resolve both issues.

Assumptions:

1. An online purchase transaction is defined as any transaction, whether for the purchase of goods or services, for which there is an online trail AND where the funds are being routed outside of Barbados.  I am therefore suggesting that online transactions where the funds are retained in Barbados be excluded from this definition.  Also, my definition implies that there will be some online purchase transactions which are not settled via credit card – but once there is an online transaction trail and funds are routed outside of Barbados, then these should qualify as online purchase transactions for the purposes of charging VAT.
2. There is interconnectivity between the TAMIS system and all ports of entry, which enable the transfer of select information to and from these systems.

Implementation:

1. Mandate that all taxpayers, on a periodic basis (no more than within 1 or 2 months), submit a request for an Online Transaction VAT Confirmation (OTVC) via the TAMIS system.  This OTVC would be a new tax form online, containing the following info:
   1. Identity of tax payer
   2. Dates of online transactions
   3. Nature of online transactions occurring within the past month – whether purchase of goods or services or combination of both
      1. For goods purchases, the mode of import would also be asked here – i.e. whether via port or via personal luggage
   4. Totals of online transactions (this could be stated in the transaction currencies, with links to the CBB website to provide accurate translations given the transaction dates)
   5. The transaction vendor/seller
   6. An upload of evidence of the transaction (such as the invoice or shipment notification)
   7. Note: The 1-2 month period should enable all taxpayers to submit all online transactions in a timely manner.  Taxpayers would be encouraged to submit 1 OTVC request per month/2 months (with a summary of all transactions occurring within that timeframe), but if they want to submit per transaction, that would also be allowed.
2. Once submitted via TAMIS, each request would be assigned a case agent and approved (similar to current tax requests and returns).  This triggers the OTVC being sent back to the taxpayer.
   1. This should enable only online purchase transactions (based on the established definition) to be approved for VAT charge.  For example, if a case agent sees an OTVC request for a local company, this would not be approved, as it does not meet the criteria for VAT to be charged.
3. For purchases of services AND purchases of goods imported via personal luggage, the VAT would be computed and due within the timeframe stipulated – could be bi-monthly as in the case of the current VAT deadline.  This could be sent as a “bill” to the taxpayer’s credit card for automatic deduction or to their bank account for automatic deduction (this would of course mean that this information would be requested of each taxpayer up front via TAMIS – i.e. the preferred method of deduction and the corresponding details).
4. For purchases of goods imported via port:
   1. The VAT on the purchase alone would be computed and due within the timeframe stipulated.
   2. The OTVC (inclusive of VAT paid) would also be sent to the ports for their record.
   3. When the item comes in to the port, the total VAT will be computed on the landed cost as usual.
   4. The VAT per OTVC would then be deducted from the total VAT to ensure no double-taxation.  This is the amount that would be paid by the taxpayer when collecting the item.
5. On a periodic basis, the total outgoing FX for each taxpayer would be subject to audit to ensure that the VAT being paid is reasonable (i.e. to ensure that taxpayers are submitting their OTVC requests and that the appropriate VAT is being charged to each taxpayer).  Failure to comply with the established system means that VAT would be computed on the total outgoing FX and deducted via their preferred payment method.  It could be further mandated that commercial banks require an OTVC summary from each taxpayer before their annual revision/assessment of credit card limits and applications for other credit extensions (such as LOC’s, overdraft limits, etc.), to ensure compliance.  (Hence, if the FX activity on the credit card statement or bank account does not “match up” to the OTVC summary, no increased credit would be granted.)
6. Penalties for failure to comply will mirror those for the regular VAT.

by Dawn Williams