WITHIN hours of the Private Sector Organisation of Jamaica (PSOJ) and Finance Minister Audley Shaw making up, a second business group has lashed the minister for his sharp criticism of those not paying their taxes.

“The Customs Brokers and Freight Forwarders Association of Jamaica (CBFFAJ) deeply regrets the statement by Finance Minister Audley Shaw, concerning the alleged involvement of Customs brokers in acts of corruption which ‘rob the Treasury of vitally needed money to run the country’,” the CBFFAJ said in a press release yesterday.

“We view the statement as being potentially damaging to the profession,” said Christopher Kennedy, president of the 40-year-old CBFFAJ.

The statement came shortly after Shaw appeared to have resolved differences with PSOJ President Chris Zacca over a speech last week in which the minister chastised the private sector for the low level of tax compliance.

Addressing last week’s PSOJ’s annual Economic Forum at the Bank of Jamaica in downtown Kingston, and in front of the visiting president of the Inter-American Development Bank (IDB), Luis Alberto Moreno, Shaw charged: “Sixty-eight per cent of the arrears of which we speak are corporate income tax arrears, and the truth is that right now we have a situation where. it’s like one per cent of Jamaica paying 75 per cent of corporate taxes, so we have a lot of work to do.”

The finance minister also suggested there was collusion between the private sector and corrupt customs officers to deprive the treasury of taxes, and he welcomed new tax commissioner, Danville Walker, in the fight against this practice.

“Customs has been a hotbed of corruption and Mr PSOJ president, I am going to be blunt, it is a hotbed of corruption because private sector importers themselves are participating along with customs officers and customs brokers in robbing the treasury of vitally needed money to run the country,” said the finance minister.

Shaw and Zacca, who was accompanied by PSOJ VP Richard Chen, who chairs its economic policy committee, met at midday on Tuesday to discuss the PSOJ’s concerns that the minister had used a broad brush to paint all business people as not paying their taxes or colluding with corrupt customs officers to defraud the government of money.

Zacca felt that Shaw’s comments were counter-productive, bordering on the unfriendly and could cause some investors to wonder whether the Government was backtracking on its pledge to be business friendly.

“We have always maintained strong support for administrative reform and have consistently called upon everyone to pay their taxes,” Zacca was quoted as saying. “But we have also suggested to the Government that it was necessary to lower taxes at all levels, as a means of getting greater compliance.”

The PSOJ president said his organisation had been working with the Government to align their views on how to solve the tax compliance problem in a context in which tax levels were seen as onerous. “With lower taxes you can get 40 per cent more compliance and we want a practical way out of this problem,” said Zacca.

Following their meeting Tuesday, Shaw appeared later that evening to have softened his strident tone, when he addressed the economic seminar staged by the Jamaica Money Market Brokers (JMMB) at the Terra Nova Hotel in Kingston.

He said his comments were not directed at the membership of the PSOJ, but at the private sector as a broad generic group. However, he insisted that the “figures don’t lie”, maintaining that the country’s tax compliance rate was too low.

He noted that the total tax arrears, without interests and penalties, stood at approximately $59 billion with the bulk owed being corporate income taxes.

“Sixty-eight per cent of those arrears are held by people.falling within the corporate income tax section,” said Shaw. Overall tax compliance, the minister said, was not encouraging with GCT, at 65 per cent compliance, being the best performing tax group. “Every other tax type is below 50 per cent and the worst of all tax types is corporate income tax.”

Against that background, the finance minister said that he was instead seeking a partnership with the private sector in fighting corruption. “I am not attacking the private sector, but I am saying to the private sector we need a partnership.

“Lift compliance rate by 20 to 30 per cent and automatically we will be able to significantly reduce the overall tax rate,” Shaw said.

The finance minister added that transfer tax on the sale of real property which saw a 1.5 per cent decrease in April, would see continued reduction until it was totally abolished.

But he argued that tax reform measures being considered by his Government could not be seen as a condition for improved tax compliance, but rather the opposite.

“If we reform the tax system (and) bring the tax rates down, in this culture of non-compliance and tax is reduced, what happens,?” he asked rhetorically, suggesting that there would still be high levels of non-compliance .

In the speech, Shaw strongly denied being against private sector interests. “I want to give the country the assurance that the Government of the Jamaica Labour Party is not anti-private sector. Nothing could be further from the truth.”

Zacca sounded at peace with Shaw in an interview yesterday morning with Power 106’s Ronnie Thwaites and Ralston Hyman, in which he spoke about the meeting with Shaw, acknowledging that the minister had a point and reiterating the PSOJ’s position that all should pay their taxes.

“We would back any call by any minister for everyone, big or small, to pay their taxes, and we would participate in any programme to improve the tax collection administration of the government,” Zacca said.

“But we are not all to be painted with the same brush, which was our main concern that it would be seen by the general public, based on the reports in the media, that we are all non-compliant in the business sector. And we have a quarrel with that because there are huge numbers of hard working business people who are doing what they have to do, under, very very difficult circumstances,” said Zacca.

He said the minister had taken the point, going by his comments to the JMMB seminar after their meeting. “Those who are not paying are wrong but those who are paying should not be lumped with them.”

Zacca wanted it clear that the PSOJ was not against businesses paying their taxes.

“But what we are arguing is that the burden of taxes, where the rates are now, and the structure that exists, demand tax reform…We wanted in our meeting yesterday to clarify whether the Government was still in favour of tax reform.”

– With additional reporting

by Patrick Foster