VAT Online Transactions

Barbadians have been migrating to purchasing goods and services online. The Mottley government in an effort to bolter government tax revenues  enacted legislation to collect VAT  on online purchases. Just this week the largely popular Amazon communicated to shoppers that “effective March 1, 202, “Amazon World Service (AWS)” would begin to charge VAT at a rate of 17.5% to Barbadian customers“.

Thanks to John A for sharing the video.

35 comments

  • This is an “unenforceable” tax in an age of “proxy purchasers” who reside in America

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  • Vincent Codrington

    @ Piece The Legend at 6 :58 AM

    We never seem able to learn from our mistakes ,do we? We create moral hazards and then ask what went wrong. I hope you and David Bu understand why from the beginning I said that this is an exercise in futility.

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  • SirFuzzy (Former Sheep)

    Am I to believe that we are really serious about VAT collections? Or am I to believe that we need to look and maybe pretend that we are indeed serious about the collection of VAT from those who collect it from VAT-payers.

    Forgive me for being stubborn or ignorant or blissfull, but they often say charity begins at home. Why should I believe we are any more serious about this when millions of dollars remain “uncollected” or maybe “uncollectable” from entities that have a billing and physical address on this rock. As the song title captures the sentiment “Things that make you go hmmmmm”

    Just asking.

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  • Who was it that said desperate times call for desperate measures?

    All this boils down to is confirmation that our tax collection on the island is so poor we must now ask the Americans to do it for us. $400M give way one way and $20 coming the other.

    I wonder what Amazon charging them for this service?

    Liked by 1 person

  • SirFuzzy (Former Sheep)

    @ John A February 20, 2020 11:09 AM

    Great point. Amazon not doing this out of the kindness of their heart for the BRA. It is all about the cold cash(fx cash) the BRA will be paying them. After all, Amazon.com is a services company.

    I will like this administration via the BRA to make it publicly known what fees/costs are involved in the “on-line collection” of this Barbados VAT by these foreign entities.

    We are so bad at governance we cant collect our own taxes? lol

    “Things that make you go hmmmmm”

    Liked by 1 person

  • Also this will cost us unnecessary foreign exchange losses too.

    When Amazon charge a customer in BIM the Vat the client will pay the selling rate of roughly $2.03 bajan to I USD. When they remit the payment it will be banked at the buying rate of $1.98 bajan to the USD. So along with paying Amazon’s collection fees for the service we also losing roughly 5 cents on each dollar in foreign exchange losses. All because we can’t get we act together with collections locally.

    We really are a sad bunch for sure.

    Liked by 1 person

  • More Barbadians are moving to electronic storefronts which means leaking of government of revenue. What are you saying John A and SirFuzzy? The government should turn a blind eye to the migration of shopping to electronic?

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  • @ David.

    No David they should collect the tax at the ports of entry like all other imports. What they are saying is they are so inefficient that they can’t get their job done.

    What the going do about the big black suitcases that sail through the airport every Sunday from New York and Miami that don’t pay a cent in duty or Vat.? What they doing about the Barrels that sail through the Harbour with $10,000 in saleable stock in them that pay $100 as personal tax as opposed to $4000 between duty and Vat combined?

    What they doing about that?

    Liked by 1 person

  • Vincent Codrington

    @ David Bu

    Taxes are already being collected on those purchases at the point of entry. There are also two taxes on the foreign currency used to pay for these purchases. This is an unnecessary imposition on those who mainly use amazon for books.

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  • Vincent Codrington

    @ John A at 11:36 AM

    I agree. Had I waited a few minutes I could have saved myself an intervention. I am still trying to work out the value added and at which point the value was added. Is not VAT a tax on added value?

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  • @ Vincent

    Exactly where is the value added? Also when we factor in Amazon’s fees and the FX LOSS between buying and selling the USD what are we getting ?

    Also if they came through port of entry the average duty rate is 20% so the state would collect both. This is an exercise in futility from both an economic and a practical side.

    Fix the dam collection issues and stop looking for a plaster when an amputation is required.

    Liked by 1 person

  • @John A

    Perhaps there is opportunity recovering revenue leakage given that Amazon is the most popular online shopping store.

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  • Vincent Codrington

    @ David BU at 1:13 PM

    Where is the evidence to support your assertion that Amazon ” is the most popular online shopping store” for Barbadians ?

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  • @ David.

    No Amazon is a personal shoppers online service. In other words Miss Browne will buy a pants and a shirt there.

    The massive wholesale loss of revenue comes from the suitcase trade and Barrel trade. They grabbing at cents and dollars sailing through the port of entries. You realise many boutiques import solely through the suitcase trade. If you doubt me go in some and see if you see a VAT certificate. Lol

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  • @ David.

    If The MOF talking bout lost VAT being collected tell her go and beg the wholesalers in down town Miami and New York to do it for her. Then she would see how much leaking for true. Then again them Chinese and Indians could still cuss you fairly good too though!

    This is like you owe me money and I can’t collect it so I run to your landlord and beg he collect it for me.

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  • @Vincent

    This is a well know factoid. You should have your sources to verify.

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  • @John A

    Many of the suitcase traders by goods online before they travel out.

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  • @John A

    If we can agree leaks exist in the tax net. What is wrong with establishing an arrangement to collect VAT as source of one of the largest online merchants in the world Barbadians do business?

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  • @Vincent Codrington February 20, 2020 1:28 PM “@ David BU Where is the evidence to support your assertion that Amazon ” is the most popular online shopping store” for Barbadians ?”

    Lolll!!!

    A few years ago my youth told me about Ali Express an online site. So old idiotic me thinks that Ali is some guy as old as I am operating out of his garage, and going to his Asian post office with his lil carrier bike.

    Then I found our that Ali Express is a subsidary of Alibaba the WORLD’S biggest online retailer with sales greater than Amazon, Ebay and Walmart combined. So if Auntie Mia wants to go after Ali Express, that is where the action is. I looked at Ali Express recently and you can even buy a Bajan 5 cent piece for about $2 BDS if you were short of small change. I think that you can buy jets and common pins too, but I have enough common pins, and I am not in the market for jets just yet.

    Liked by 1 person

  • @Simple Simon

    Alibaba is mainly wholesale and does not target individuals so much.

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  • @ David

    Fix The leaks that would be the answer. You losing Millions and that same pant you collecting 17.5% based on purchase price in the USA, IS a fraction of what you should be collecting here based on the retail bajan price inclusive of duty and Vat at port of entry.

    Remember the average duty rate of 20% is also being lost along with the 17.5% vat you should be collecting at the retail level in Barbados. Instead you grabbing at the few cents in vat at first cost from the seller in the USA.

    I keep saying VAT is not a bad tax, it’s that governments don’t seem to know how it works so as to capitalise on it. So look below.

    Pants $10 USD on Amazon = vat collected $1.75 USD or $3.50 bajan by Amazon

    Pants shipped to Barbados with duty and Vat at retail collected.
    $10 USD plus freight =$11 USD. Convert that to bajan $22.00 x20% duty = 22 + 4.40= 26.40 landed.

    So let we see what is best for the state knowing that all shortfalls on revenue we that don’t want a pants now will have to.make up anyhow.

    Now we add say a 50% mark up and the country vat at retail = 26.40 landed duty paid x 1.5= 39.60 + 17.5% vat of 6.93= retail price of $46.53

    duty of 4.40 ( port of entry)
    Vat. 6.93 ( at retail)

    Total collected by the state if customs was wuking= $11.33

    Vat collected by amazon= $ 3.50 before we subtract their collection fees which we have not been advised on yet.

    So you trying to tell me that it don’t pay to fix the broken collection systems and collect over 3 TIMES AS MUCH ON 1 PANTS than pay Amazon to collect a fraction of it?

    Talk bout penny wise and pound foolish! Also I used only a duty of 20% for the example, in the case of some clothing it was 40% which would result in even a bigger lost to the state.

    There was a time we could of call this keelmanomics but we can’t even blame him no more poor fellow.

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  • @ the north pole we pay the tax when the parcel arrive @ the post office. or sometimes the tax is paid to the company that’s shipping it two you .the way BIM is doing it going to cost y’all big time . may be it’s away to stop you from shopping on line . just saying

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  • @David February 20, 2020 5:12 PM @Simple Simon. “Alibaba is mainly wholesale and does not target individuals so much.”

    David in this I am guided by my youth who recently bought a single $3.50 USD phone case from Ali Express. Ali Express shipped the single item all the way from China. Efficient. Although can’t be energy efficient. The phone case would have cost $30 to $40 local. It seemed identical to what was available locally.

    So Ali Express is willing to ship a single cheap item halfway around the world.

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  • Never said individuals cannot do purchases. Its core target is different to Amazon plus it is not a popular online shop for Barbadians.

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  • @John A

    Could it be government had contemplated it cannot fix the onshore leaks in quick time and or the explosion of online transactions allow the opportunity to have a third party with a more efficient billing collection system to do the job. The revenue collected will adequately cover off the related expense of the transaction?

    #askingforafriend

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  • @ David.

    Well in the meantime we losing over 3 times the value in total taxes on each dollar Amazon collects based on them being the agent as opposed to our brek ass system being fixed.

    Plus it will end up by entertaining the slackness at the port of entries rather than fixing them. After all we will still have all them that don’t function to pay too!

    Finally until we are told the fee Amazon is charging to act as a collection agent for the Barbados Gov, one must ask what is the net we are actually going to get from the 17.5% Amazon holding.

    Wonder what the IMF would say bout dat?

    Liked by 1 person

  • Hopefully Straughn will issue a clear the air statement soon.

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  • Vincent Codrington

    “The higher the monkey climbs
    the more he exposes his Rs.”

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  • Vincent Codrington

    @ John A at 5:20 PM

    The value added tax , rigorously applied, is a very effective and efficient tax . We have misunderstood how it works and why we introduced it in the first place. If I did not know better, I would opine that it was deliberately sabotaged. But I am NOT a conspiricist.

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  • Vincent Codrington

    @ David BU

    What is a “factoid”? When one coins or uses uncommon words ,it is helpful to define it for us who went school long but learnt nothing.

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  • @ Vincent

    Definitely agree with you there. It’s a perfect tax collection tool and we let it just sit there and under perform while we think up other forms of direct taxation for the backs of Bajans.

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  • The Governor of the Central Bank Haynes seems to be comfortable with the amendment to the VAT legislation. He said in summary it will improve tax collection.

    Like

  • Straughn: Ecommerce giants will administer tax
    Kareem Smith
    Article by
    Kareem Smith
    Published on
    February 21, 2020

    Multimedia e-commerce giant Amazon and a host of other online international companies will soon be collecting Value Added Tax (VAT) on behalf of the Mia Mottley administration.

    But the Seattle-based company and several others are still in discussions with the Government on exactly how the tax will be collected.

    On Thursday night, Minister in the Ministry of Finance and Economic Affairs, Ryan Straughn sought to clear any lingering doubts on whether the VAT will be levied on online purchases and in doing so, he defended the administration’s position as he addressed reporters after the official opening of Kooyman’s megastore at Kendall Hill, Christ Church.

    According to the Minister, Amazon officially registered with the Barbados Revenue Authority (BRA) in November last year after discussions with many other online-based companies.

    He added that the decision for Amazon’s Web Services (AWS) to begin collecting taxes on behalf of the Government from March 2020 is just the beginning of ongoing negotiations aimed at “phasing in ‘’ all commercial activity conducted online by Barbadians. This, Straughn says is consistent with changes to the VAT Act last December.

    “The web services proportion obviously speaks about the digital services part. Barbadians are obviously more concerned about the actual retailing side of it and it’s something that will obviously be phased in, because that is something that will come on stream afterward with respect to the actual retail side of it,” Straughn revealed.

    The Minister’s confirmation of the pending VAT follows a firestorm of controversy which followed Barbados TODAY’s recent revelation that AWS would start collecting the tax from its customers in Barbados. The story was criticised on social media and even in some sections of the media for ‘misinforming’ the public about Government’s intentions.

    In addition to confirming the development, Straughn added that the adjustment would allow the Government to collect taxes paid when visitors stay in local AirBnB properties.

    But he revealed it will also allow taxes to be collected from Barbadians using popular American media service providers like HULU and Netflix.

    “We have been in discussion with AIRBNB to settle the MOU for collecting the taxes and to determine how the taxes will be transmitted and the frequency and those things. There are a number of online services including Netflix, HULU, some of the gaming sites. There is quite a plethora of activity taking place in the digital space and up until now, the Government has not really looked at how it is taxed… and a lot of discretionary spending has taken place that hasn’t been focused on and unfortunately, Barbadians have been having a lot more direct taxes placed on them. So as we transition from less of a focus on direct taxation and more on indirect taxation, that is where you are going to see a shift with respect to Government’s tax policy,” Straughn explained.

    Defending the adjustment, the Minister noted that currently, Barbadians are paying taxes to U.S states which ought to be entering the Barbados treasury and assured citizens that no double taxation would occur.

    “I understand the concern that people may have about increased taxation but the truth is you are already paying taxes in the states that those goods are coming from and therefore all we are trying to do is to ensure that we collect the revenue that helps to support the delivery of public services in Barbados because while persons are trying to circumvent paying taxes in Barbados, they end up supporting the public infrastructure of other jurisdictions,” the Minister in the Ministry of Finance told reporters.

    “I think it behooves all Barbadians to understand that we are not taxing you twice and part of the reason we want to go this route is to ensure that once goods come to the border through the various couriers that obviously all of that information is shared at once so that once it gets to the border and customs goes through the customs process, everything will be clean with respect to the data and avoid any notion of double taxation,” he added.

    Straughn also gave the assurance that Government’s zero-rated goods like books and certain electronic devices which now do not attract VAT in local retail stores will also be zero-rated online.
    kareemsmith@barbadostoday.bb

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  • Everything in Barbados has tax on it. All the the banks that are left charge an annual fee. The country keeps adding charges to import fees which are to high already. These fees come from the governments inability to collect delinquent VAT, delinquent land taxes, delinquent water bills, and to cut spending. Even airlines taxes for departures. Look at what it costs to bring a car into the country, and they the roads are to crowded, and the pollution it causes. Why not reduce those duties for electric vehicles. It has become an island of the rich! The poor only survive by those relatives shipping barrel of food stuffs to them.

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