TnT Government considering cash and bonds to meet VAT refunds

The Trinidad and Tobago government is considering issuing a combination of cash and bonds to help reduce the outstanding TT$7.8 billion (One TT dollar=US$0.16 cents) in value added tax (VAT).

Finance Minister Colm Imbert told the Senate that at least three billion dollars would be issued in the form of bonds and that the government has examined the possibility of a sales tax system to replace VAT.

He told the Senate that the authorities had made VAT refunds totalling four billion dollars last year and that the issue of outstanding VAT refunds isn’t  something new as the records would show that the amount of outstanding VAT refunds stood at three billion dollars in May 2010.

“And notwithstanding record levels of income and expenditure in the 2010 to 2015 period, the amount of outstanding VAT refunds increased to $4.6 billion by September 2015. The present government thus inherited close to five billion dollars in outstanding VAT refunds when it took office in 2015,” he said

“The value of outstanding VAT refunds amounted to $7.8 billion at the end of March 2023, Imbert said, adding that “the timeline to clear the backlog of VAT refunds is dependent on the availability of cash flow to enable an accelerated reduction in the refund arrears”.

Imbert said it would also depend on the anticipated administrative reforms consequent on the full implementation of the Trinidad and Tobago Revenue Authority (TTRA), which is expected to significantly reduce the amount of VAT refunds claimed.

“It is not possible, therefore, to give a firm timeline at this time. However, I’m pleased to announce that Cabinet recently agreed to the issuance of VAT bonds in the aggregate sum of three billion dollars to assist with the settlement of outstanding VAT refunds to date, to be issued in tranches.

“It is anticipated that these bonds will be issued between June and August 2023 and, as in the past, these bonds will be suitably priced to allow full redemption at par in the commercial banks. These bonds will bring the total amount of VAT refunds for 2023 to over $5 billion and significantly reduce the amount of outstanding refunds.”

Imbert said in addition to the issuance of the three billion dollars in VAT bonds, “we’ll continue to issue cash refunds.

“At this time the cash refunds are estimated to be between one billion dollars and two billion dollars,” he said.

“So you’re really looking at a backlog that is closer to US$2.8 billion. We believe when the TTRA comes into full implementation that the non-compliance gap will be significantly reduced. So it’s a combination of bonds and cash refunds and better administration of the tax system.” (CMC)