By FAY SIMMONS

jsimmons@tribunemedia.net

The Government's top tax collector yesterday branded the $875m in combined outstanding VAT, real property tax and Business Licence arrears as "alarming" even though this sum has been slashed from the previous $1bn.

Shunda Strachan, the Department of Inland Revenue's acting controller, said the agency is determined that VAT debts will not balloon to reach the $600m in real property tax liabilities that account for the majority - some 68.6 percent - of the total $875m arrears.

“You've not seen this level of enforcement before, but it is critical now," she added. "Because as the country moves in a particular direction, and our expenses increase, we need the revenue in order to satisfy those expenses. And so while the Department of Inland Revenue doesn't deal with expenditure, per se, we do deal with revenue collection. So, probably a couple of months ago, we reported our arrears was over $1bn and we took that very seriously.

"It's for us to bring those arrears down. So while arrears are continuously added to the bucket, and if there's an up-and-down kind of action going on, we will be told what those arrears are in the billions. So, bit by bit, we're trying to get them a bit lower. We're right now, I'd probably say, at the $875m mark; we're not at $1bn any more, right. But it's still alarming that we have that amount of those greater risks out there.

"Real property tax is still leading the way. So we still have more than $600m in arrears for real property tax. But VAT is a new tax. And I don't know if you remember, but when we implemented that it was said that we won't allow that to be another real property tax. And so, for us to ensure that we keep on top of things relative to our arrears, we really have to use the powers of enforcement," Ms Strachan continued.

"VAT is a very hard tax because, really, you would have collected already. It's not a tax that the business pays; it's a tax that the business collects on behalf of the Government to remit to the Government. So if you're collecting VAT, and you're not paying that VAT over, then it amounts to really stealing - misappropriating the Government's revenue. And so we are now taking a very hard line on businesses that have collected and not paid over the VAT to the Government.”

Ms Strachan said the issues that the Department of Inland Revenue encounters most frequently are companies operating without a Business Licence, firms not declaring that they have reached the $100,000 VAT registration threshold, and businesses that do not keep adequate records.

She added: “What we're noticing is that we have more and more businesses that have no Business Licence. So you have businesses engaged in generating turnovers, and they're not reporting or they're not applying for the Business Licence. So that was one concern that we noticed, especially in the Family Island.

"We're concerned because we have businesses operating, but they really don't have valid Business Licences. The second thing was, or is, that we're noticing is a whole lot of businesses that we know have reached the $100,000 VAT threshold but they're not registered for that, and that's alarming to us.”

"We saw on the Family Islands where businesses had no Business Licence. But yet, when we go in, they tell us they have no records. So, again, the law mandates that if you are in business you are obligated to keep records. That's an obligation. And the fine for not keeping records is great, you know. There's a massive fine, and it's actually an offence.”

Ms Strachan said that, as a result, the Department of Inland Revenue has no choice but to use its enforcement tools and crack down on bill duckers and tax cheats. She added: “We went through a season of inviting persons and businesses in recommending that they go on payment plans for real property tax. We did a whole lot of amnesties. And we did a lot of incentives.

"We offered a lot of incentives to persons just to kind of regularise and to satisfy their tax obligations. That is now ended; we're not in that season any more. We're in the season of enforcement. And the Department of Inland Revenue has a whole lot of powers in its bucket that it can utilise. It's really because of the arrears that we're seeing, and they're building. And so the Department has an obligation to collect the Government's revenue.”