Government backs off some new tax measures
THE Ministry of Finance and Planning has given an assurance that it will withdraw some of the measures proposed in the Tax Collection (Miscellaneous Provisions) Act and the Tax Penalties (Harmonisation) Act which are aimed at facilitating increased tax revenues.
In response to growing opposition over one of the most egregious proposed new measures, the ministry said in a release on Friday that the Government has agreed to move an amendment in the Senate next Wednesday, which will ensure that no lien could be registered against property owned by tax debtors without a specific court order being obtained.
The original proposal in the Bill would have allowed the Commissioner General of Tax Administration Jamaica (TAJ) to place a lien on the property of tax debtors without a specific court order, through the issue of a certificate by TAJ, certifying the amount owed.
The release explained that this would be among several amendments to the bills, which will be introduced during the debate in the Senate, but did not state what other changes were being contemplated.
"This amendment, among others to be introduced by Senator Mark Golding (minister of justice) during the debate in the Senate, is in keeping with our determination, as an Administration, to continue to build consensus that can embrace all well-thinking Jamaicans about the necessity for economic reform generally and specifically, in this instance, to create a more tax compliant environment," the release said.
However, it was obvious that the move was really triggered by strong criticisms of the provisions by Opposition spokesman on finance and planning Audley Shaw, in the House of Representatives on Wednesday, as well as the concerns of the private sector raised in discussions with the ministry.
The Government had planned to have two bills piloted through the House of Representatives by Finance Minister Dr Peter Phillips on Tuesday. However, after the minister opened the debate, objections from the Opposition to completing the process without giving them time to digest the details led to a postponement until Wednesday.
Dr Phillips told the House of Representatives Tuesday that the bills would introduce a suite of amendments to the Tax Collection Act, the Revenue Administration Act, the Income Tax Act and the Education Tax Act, intended to improve and increase the collection of domestic taxes of all types.
He said that enhanced collection methods were needed to lend support to the efforts of the TAJ to meet its revenue targets in a sustainable manner, and reduce the need for amnesties and other special projects.
"There is an endemic culture of tax avoidance, and I dare say tax evasion that has, over many years, created the conditions that underlie the build-up of debt in the country," Phillips told the House.
He described the bills as follow-ups to the 2013 amendments to the Revenue Administration Act, which strengthened the powers of the commissioner general to gather tax-related information.
"These provisions should allow the information now being collected to be put to efficient use in support of collection," Phillips said. He also noted that the intent was to bring non-compliant behaviour out into the open to mass media and public records.
He said that this would reduce the level of ease with which "tax dodgers and cheats proceed with their business, masquerading as good citizens, corporate or otherwise".
When he responded the following day, Shaw criticised the Government for debating the bills a week and a day after they were tabled in the House of Representatives, instead of sending them to a joint select committee of Parliament which would have allowed stakeholders to make submissions in favour or against the measures.
Shaw accused the Government of promoting a "culture of disrespect" for due process of parliamentary review and scrutiny in recent months, in which critical measures like the tax revenue proposals were being rushed through Parliament without the Opposition and other stakeholders being given time to absorb them.
He said that the "time-honoured tradition", that bills of this gravity and importance are put to a select committee or joint select committee of Parliament to hold hearings, and allow the public and stakeholders to appear before Parliament and share their views, was being "savagely, if not arrogantly and disrespectfully" dismantled.
"All of this time-honoured tradition is being thrown out on the altar of the dictates of our new master, the IMF, and we must hurry and pass the laws in time for the next test to be passed," Shaw stated.
He said that, according to Phillips, due to the endemic tax avoidance and evasion, enhanced powers of tax collection were needed to change the culture of evasion and avoidance. However, Shaw insisted that Phillips was "very ambitious", if he felt that the answer was to "use a blunt instrument".
"An instrument so blunt that, instead of generating a culture of co-operation, it might deepen the problem of avoidance," Shaw suggested.
He questioned whether the need was to enhance the powers of the tax administrators, or to enhance their capability to improve tax collection.
"That's an issue that has to be discussed," he said, pointing out that, on one hand was the issue of the law, and on the other the practical matter of administering the law. He said that the first question to be asked was whether the country had adequately researched the administrative capabilities and necessities within the context of existing revenue administration laws, which already had awesome powers.
"But, in our mad rush to impose these enhanced, if not draconian powers, is this Government prepared to trample upon the constitutional rights of the citizens of Jamaica in order to achieve this objective?" Shaw asked.
Dr Phillips, in responding, accused Shaw of being "dramatic" and making "overstatements and shrill misrepresentations".
"The context in which the legislation has been brought... there is a widespread, indeed, an endemic culture of tax evasion and tax avoidance that has afflicted the country and, I dare say, if we are to be honest, it is that failure to support the revenues on the part of so many persons that is, at least in part, accountable for the extent of the debt that has been built up over the years," Phillips stated.
He explained that, in the absence of adequate revenues to meet expenditure, "properly expected from the population", there has been an easy recourse to borrowing.
He also pointed out that the Companies Office of Jamaica (formerly the Registrar of Companies) has some 82,000 companies listed, of which some 62,000 were filing returns.
"So we assume that those (62,000) are functioning; (but) only 18,500 companies are registered for corporate income tax with TAJ. That's the environment in which are operating," Dr Phillips said.
He added that among large taxpayers, companies with sales of $1 billion or more, 27 per cent did not file any returns at all, and 21 per cent don't pay anything. He said that among companies with sales of $150 million or more, close to 56 per cent have not been filing individual income tax returns, while for those with sales of $10 million, the figure not filing was 57 per cent.
"This is the nature of the reality which we face. What the legislation seeks to do is to create an environment in which companies and other specified groups are required to file," Dr Phillips insisted. "It makes provisions for penalties to apply where there is failure to file. It enables tax authorities to set up electronic systems to facilitate filing."
However, he said that the current amendments have to be read in conjunction with the principal Acts, as well as other measures taken previously to improve the dynamics of tax collection.
The Ministry of Finance's release Friday said that the two new bills are part of a sustained effort aimed at transforming the culture of tax evasion and non-compliance. It said that the bills will enhance the capacity of Tax Administration Jamaica to collect the revenue and ensure that taxpayers make the necessary filing and meet their obligations to the general revenue.
However, the ministry said that, while it is "entirely satisfied", based on the legal advice it has received, that the measures contained in both bills, as they now stand, are entirely appropriate and in keeping with international best practices within Commonwealth countries, it has "nevertheless decided to move an amendment which will ensure that no lien could be registered without a specific court order".
The amendment contained in the new bill was that the commissioner general may issue a certificate certifying the amount owed by a tax debtor that has not been paid, or any part or amount of tax owed by a tax debtor that has not been paid, as an amount payable by the debtor.
The commissioner general would then be able to present a certificate in respect of the tax debtor to the Supreme Court, which shall be registered in the court and, when so registered, have the same effect as a court judgement against the debtor for a debt in the amount certified.