Squeezing blood from a stone

Friday, January 13, 2012

Dear Editor,

Amendments to the Companies Ordinance now require companies, in addition to keeping proper accounts, to keep underlying documentation including invoices and contracts for a period of no less than five years. Failure to keep those records will render a company liable to a fine of up to US$50,000. Those amendments to the legislation came into force on July 29, 2011, but most people are not aware of their obligations under the legislation.

Similarly, an amendment to the Customs Ordinance on November 10, 2011 requires all importers to retain all records of imports for a period of five years, with a fine of up to $5,000 for failure to do so.

On August 31, 2011 the Government released a statement that import duties were much lower than budgeted and that they feel the reason was that there might be 'under-declarations' by importers. The release went on to say that Government will be looking into declarations currently at the Customs Department, and pursuing importers where they find that items were 'under-declared'.

On the same day the attorney general issued a release in relation to stamp duty, indicating that that office would be expanding the scope of the SIPT investigation to include whether there was/is a widespread practice of evading the payment of stamp duty, and that additional investigators will be secured to deal with the expanded workload. Additional staff to deal with the expanded role of the $11,000,000-a-year SIPT and CR teams.

Similarly, on September 6, 2011 another Government press release quoted the new CFO as follows: "The country's finances have been stabilised thanks to the UK Government providing guarantees for the refinancing package and the process of modernising the country's... revenue collection system."

If readers have not yet felt the pain and figured this out, the above measures are preparation for a more onerous tax regime. It appears, also, that despite all the expertise that Government and their many foreign advisors claim, they lack a basic understanding of what locals refer to as an inability to get "blood out of stone", or what economists call an elastic demand curve, which is that in some cases minor increases in the price of goods or services will lead to a relatively large number of individuals choosing not to consume those goods or services.

What that means is that the Government can increase taxes as much as they like, but if individuals don't have the money they might not consume as many goods or services, with a possible reduction in total tax revenue for Government, defeating their very objective.

It appears that until we return to the idea that Government should actively facilitate and promote business, and that it should create incentives for inward investment, we need to get used to the idea of having Government's hands deep inside our pockets while they hunt us down and treat us as criminals if there is a shortfall in Government revenue.

Peter Forbes

peterforbestci@gmail.com

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Squeezing blood from a stone