Multimillion-dollar GCT waivers granted by Gov't

Daraine Luton, Senior Staff Reporter

Carib Cement Company Limited (CCCL), benefited from a $28.4 million general consumption tax (GCT) break in December 2010, despite the freeze on discretionary waivers imposed by the Ministry of Finance.

The cement company is among several companies and individuals that benefited from the $321.7 million in waivers dished out by Shaw after the freeze on waivers came into effect August 1, last year.

The reason given for the CCCL waiver, approved by Finance Minister Audley Shaw, was that the company has an "excellent compliance record".

Last year, the Ministry of Finance said: "The GOJ has approved a freeze of and reduction in all discretionary waivers that may be granted by the minister of finance and the public service (MFPS), effective August 1, 2010. The freeze of all discretionary waivers granted by the MFPS means that no new discretionary waiver categories will be considered or approved between August 1, 2010 and the date of adoption of a new Tax Waiver/Incentive Policy and Strategy."

It added: "The reduction in all discretionary waivers granted by the MFPS means that the consideration of discretionary waiver applications between August 1, 2010 and the date of adoption of a new Tax Waiver/Incentive Policy and Strategy will be done within the context of achieving a significant reduction in the total value of waivers granted."

Freeze not air tight

However, based on information published on the ministry's website, revenue continues to leak from the Government's coffers as the freeze has not been airtight.

Another company, Power Services, had its $13.8 million GCT charge written off by the minister.

The ministry cited "downturn in business leading to financial hardship" as the reason for approving the $13.8-million waiver for the company what owed GCT dating back to 2005.

Meanwhile, Shaw has also approved a multimillion waiver for Executive Motor Limited, waiving $183.7 million in GCT due for the period April 2000 to August 2004. The company got the waiver because it was said to be in "financial constraints in the face of enormous liabilities".

Financially weak

INFOTECH Caribbean, which owed $16.6 million going back to 2005, had 98 per cent of its $16.9-million GCT debt written off because it was said to be in a "weak financial position".

A document, prepared by Paul Mathieu, who is paid by the European Union to work with the local finance ministry, suggests that the values of waivers have increase by 55 per cent since the freeze was put in place.

Mathieu describes the increase as "a rather baffling outcome" as the freeze on discretionary waivers was meant to "put the brakes on the speed at which the Government's fiscal revenue is leaked", and not to "accelerate the pace at which those leakages took place".

The country's economy has been crippled by a deep recession which forced the Government in 2009 to enter into a borrowing relationship with the International Monetary Fund. Despite the financial injection, the country continues to struggle. The fiscal accounts indicate revenue and grants are running $4 billion below projection, with tax revenue is off by $1.2 billion for the period April 2010 to December 2010. The revenue shortfall has forced the government to cut expenditure by $12 billion.

GCT waivers approved by Shaw since freeze was announced

August - $1.3 million

September - $9.3 million

October - $16.7 million

November - $6.3 million

December - $287.8 million