Gov't promises VAT, income tax refunds next week

Government will need to find up to $9 billion to finance its covid19 economic bailout plus make-up the gaps in the 2020 national budget following to collapse of international commodity prices in recent weeks.

In a media briefing Monday at the Diplomatic Centre, Finance Minister outlined the stimulus programme, including VAT refunds and a temporary unemployment grant, as well as the funding estimates. “We are looking at plugging a hole in the (budget gap) revenue situation of $6 billion or $7 billion and then $2 billion immediately to deal with these support measures,” he said. Economic and social programmes, he estimated, would cost an additional $1 billion, and then accelerating payments to contractors, suppliers and other vendors would cost another $1 billion. “We will have to find cash for them immediately,” he said.

He outlined four sources of financing – the Heritage and Stabilisation Fund, for which legislation to amend will go to Parliament on Wednesday; assistance from multilateral organisations like the Andean Development Bank, the Inter-American Development Bank and the International Monetary Fund; loan financing from international commercial financial institutions; and foreign currency, specifically the “large deposits of US dollars in the local banking system,” which he estimated was about $3 billion. “We are going to use a mix of approaches,” he said.

He also gave details on VAT and income tax refunds to businesses and individuals, mostly the self-employed. Next week, he said, the government will pay everyone who is owed up to $250,000 in VAT, or about $280 million in total, as well as $110.2 million in overdue income tax refunds to individuals owed $20,000 or less. The State is scheduled to receive corporation tax payments this quarter, Imbert added, and depending on that cash flow, will try to repay VAT refunds to corporations owed between $250,000 and $500,000 – a further $107 million more. “I can tell you we are going to this and I can say this without any fear of contradiction that next week we will pay everybody who hss an income tax refund due to them of $20,000 or less and everybody who has a vat refund $250,000 or less and we’ll see if we can get up to the $500,000, next week, in cash.”

The government, he said, was dealing with the small person and small and medium sized businesses first, in terms of refunds and then would get to larger people, who have more capacity to hold strain for a little while longer. “Seventy-five per cent of people who are owed income tax refunds are owed $20,000 or less. And people who are owed up to $250,000 in VAT refunds, 90 per cent are owed $250,000 or less.” In total, he said the amount of VAT arrears the government owed to business as of Monday was $6.225 billion but of that $5.024 billion was owed to 72 large corporations like oil companies, who were expecting refunds of $10 million and over. The $3 million in VAT bonds offered as repayment and promised in the last budget should be offered by the end of next month. Since these bonds don’t need to be repaid until after some time, they do not put an immediate cash burden on the State.