On-Line Taxation for Barbados

axim -taxationOn June 11th, 2018 the Prime Minister of Barbados stated as follows: “I announce the intention of my Government that effective October 1st, 2018 we intend to make all online transactions for the purchase of goods and services by Barbadian residents subject to the Value Added Tax. The Barbados Government has announced the taxation of online transactions.” This date has subsequently been shifted to December 15, 2018 and then to April 2019.

It comes as no surprise that this initiative comes hand in glove with the OECD Base Erosion and Profit Shifting (BEPS) initiative. In March 2017, the G20 Finance Ministers mandated the OECD, through the Inclusive Framework on BEPS, to deliver an interim report on the implications of digitalisation for taxation by April 2018. It is however the case that what suits the rich countries of the world does not necessarily suit developing countries like Barbados which have an underdeveloped innovation and entrepreneurial base.

THE SAVIOUR OF SMALL BUSINESS
The reality of Barbados is that many have turned to sourcing products on line because often they were unavailable, the choices were poor and the mark –ups were exceptionally high. In addition Barbados against all the odds has established a cadre of small businesses which use websites, Facebook and other social media as a means of getting their products noticed. The high cost of advertising in the traditional media would have meant that these small businesses would not have existed or would be far less successful.

THE CREATIVE AND DIGITAL ECONOMY
The Creative Economy which is seen as a new growth sector for Barbados and which has been appropriated in the name of the Ministry responsible for Culture is highly dependent upon information technology and the digital economy for its success. Developed countries do not tax anything before it can run successfully, so while this might suit them with the advent of power houses such as Microsoft, Apple, Amazon, Facebook, Twitter and Reddit. Barbados is not there as yet. The Creative Economy has experienced a boom in many countries because of the ability to sell a range of cultural and creative products online.

VALUE ADDED TAX PRINCIPLES
VAT is a tax on consumers and is meant to pass through businesses unless of course the business is the final consumer. Exports are usually exempt from VAT. Imports are usually subject to VAT at the official ports of entry. Thus online purchases will be captured at the ports. We have heard that if one pays VAT online there would be a refund when one collects at the Port. However one recoups the VAT it must be that customs must be able to tell without doubt that the documentation produced matches the good in their possession and the value of the good declared is consistent with that of Customs.

SERVICES PRODUCTS AND DIGITISED GOODS
The products that the Government is most concerned with then are not tangibles but intangibles. This includes items that can be downloaded from the Internet to the Computer like software for computers and other equipment, music, beats, and the services like website hosting and Facebook boosting. All of these are critical to the emerging Creative Sector with its focus on culture and technology. Since the intention of VAT is to tax the consumer and not the supplier then it does not matter that the supplier is outside the jurisdiction.

THE TAXATION MECHANISM
This is the big question. The two main methods of buying products from overseas are through the use of credit cards and wire transfers. One would expect that the Government would be examining these two systems which fall within the purview of the banking system. This banking system already levies a 2% tax on all foreign exchange transactions. Barbadians must also be mindful that credit cards carry draconian interest rates often as high as 25%. The difficulty here is whether a distinction can be made between any of the transactions to determine whether they should be subject to VAT or not. Will educational material such as books enter freely at the Port be taxed on line if downloaded? The Government can of course take the position of insisting on the payment of the VAT and leaving it to the purchaser to get that refund.

CONCLUSION

Very few countries have found an efficient way of imposing this tax on online transactions and Barbados is not ready for the increased compliance and administrative costs which would result. There can be no doubt that this would be yet another burden for small businesses and especially those operating in the cultural and creative space. The Creative Economy has never had a fair chance to be an engine of growth. An online tax would stymie these individual efforts. Small businesses are already reeling from the petrol tax and the reintroduction of a tax much like the solid waste tax. There is not much more that small businesses can bear, many of them have closed their doors; some professionals have had no choice but to carry on their practice from at home. This measure may very well be problematic and will do more harm than good.

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Into the Looking Glass: Our Society within the Justice System


bealex boy-looking-in-mirror-f214-22-605Most of us do not ever venture into a Court unless we are a part of the Justice System in Barbados – maybe a lawyer, police officer or probation officer.

While efforts have been made to upgrade the Courts they are essentially functioning under the same physical constraints as they have been for decades.

One still approaches the Court to find people sitting on benches or standing outside the Court until they are ushered in. Some benches now have back rests but some still do not. Perhaps the Courts are intended to be an unwelcoming place because the intention is to make one uncomfortable with the visit.

Who is likely to be there

(I sometimes think however that our infrastructure reflects who we expect to use it, and thus the stark contrast between the van stand and the international airport – but that is merely a random thought. )

The Magistrate’s Court has both a civil jurisdiction of no more than $10,000.00 with some exceptions such as wrongful dismissal and a criminal jurisdiction, thereby seeking to address many of the small but not unimportant issues plaguing the society.

Individuals are often seen at their most desperate and their most vulnerable. Some manage to catch a glimpse of what it is like for those whose existence in our society are predetermined to be solitary, poor, nasty, brutish, and short.

For every charge or grievance there is a societal issue which has lead to the appearance before the Court. And arguably the appearance marks a failure of the society to deal with that set of circumstances adequately.

The underlying social issues

Assaults might stem from relationships within the community which have soured whether they be relationships between spouses or between friends.

Disputes might occur over maintenance because parents do not understand their parenting role or their understanding might be clouded by anger over the failure of the relationship.

A debt in the past which would have been forgiven between friends becomes a matter for the Court because friends consider themselves wronged somewhere along the line in the friendship – maybe a falling out over a woman.

Then there is the passing parade of those involved in minor criminal activity. Many of them young men under 25 years of age – the future of Barbados. Magistrates offer words of warning, words of reason with the certain knowledge that quite often those who appear before them will appear once again, older, with more serious crimes.

Underpinning all of this is that many of our Citizens have mental problems which just like physical problems will get worse if not treated.  

All of these matters come before the Magistrate who over time comes to recognise the human emotions layered beneath the cold bedrock of the law.

Can the Court adequately address these underlying problems?

The Magistrate’s Court is a good barometer if we wish to examine the struggles of ordinary people. It is clear that some individuals need help. Probation officers are on hand, recourse is made to investigations and reports on the family as well as reports to inform sentencing. There are some rehabilitation and counselling programmes which are available, some run by government and some which are private.

Relatively new tools have been introduced such as the Domestic Violence (Protection Orders) Act Cap. 130A and the Penal System Reform Act Cap. 139 which give the Magistrate more and better options in dealing with those who appear before him.

And yet we have not done enough.

What is to become of the individuals in now forced relationships who have the responsibility of raising children when they have not themselves come to terms with their own problems?

What is to become of the hundreds of boys and young men who appear before the Court on a monthly basis?

Should community disputes however small require the engagement of the full armament of the judicial system?

It is now normal for there to be a public outcry fuelled by social media when there is some tragic event. But the truth is we do not pay very much attention when the symptoms first appear either as individuals or as a society. 

Seeking new solutions

For those who agree that more should be done and that there should be more effective solutions, it will be a daunting task to recalibrate the thinking of the majority to the view that those who appear before the Courts could benefit from earlier interventions and evaluation, monitoring and support after trial.

Since we are no longer our brother’s keeper – let it be said too that weightier interventions and more effective programmes would make the society better for us all.

Lynette Eastmond