Why do we pay taxes?

EACH year as we approach the March 15 income tax due date, we repeatedly hear the question, “why do we pay taxes?” This question is not peculiar to Jamaicans and in fact is frequently asked worldwide. The simple truth is that taxes are necessary to finance a Government’s expenditure in the interest of its people, and Jamaica is no different.

Taxes are regarded as a major source of revenue, which allows the Government to finance its operations as well as provide well-needed services. Taxes pay for schools and educational programmes; government hospitals, clinics and other healthcare programmes; roads, bridges and other road works; fund welfare programmes and provide a social safety net; finance the police, military and other national security programmes; and other government programmes and expenses.

Without adequate revenue inflows, Government is unable to properly cater to the nation’s social and welfare needs, build infrastructure that is necessary for economic development, and service its debt. Tax revenue is one of the main ingredients forming the mix of Government’s fiscal policy. In short, “Taxes hold the key; to how much the Government can do for you and me”.

Are there different types of taxes?

Yes. As you are aware Jamaica’s tax structure has several main types of taxes, such as:

* Income Tax

* General Consumption Tax (GCT)

* Customs Duty

* Property Tax

* Stamp Duty & Transfer Tax

Since March 15 is the due date for declaring and paying income tax, the current focus is on this tax type.

What is income tax?

Income Tax as the name suggests is tax paid on income and is to be paid by every person, whether company or individual, at the rate or rates specified in respect of all their income, profits or gains earned or received. Most individuals are familiar with paying Income Tax through the Pay As You Earn (PAYE) system, because taxes are deducted at source from their salaries and wages and other employment earnings including bonuses, fees, commissions and benefits in cash or kind. The amount deducted through PAYE would be reflected on their pay slip/advice.

Income Tax is also payable by business persons, including employed persons with additional income, and companies on the following:

* Profits or gains from a business

* Interest on savings & other investments

It should be noted that for individuals not all income earned is taxed, as there is a tax free benefit or income tax threshold of $270,504 (2009) and $441,168 (2010). For employed persons, this is apportioned each time they are paid, whether weekly, fortnightly or monthly, while self-employed persons would apply the amount when they are computing their tax liability.

How do business persons, companies pay income tax?

Companies, self-employed persons, partnerships and employed persons with additional sources of income are required by law to file an income tax return for the previous year (2009) and declare an estimated income and tax payable for the current year (2010) by March 15. They would do this by completing the relevant tax forms, submitting it and paying the income tax due, at any one of the twenty-nine Tax Offices/Collectorates located across the island.

Tax Administration’s online service has also been expanded since March 8, 2010, to accommodate the electronic filing of income tax returns IT01, IT02 & IT07 and payments, via the Jamaica Tax Portal at www.jamaicatax.gov.jm. The online service offers greater convenience as transactions can be done from anywhere and at any time. To use the service persons must first complete and submit an Application for Electronic Filing Registration form. However persons already registered to use the online service for other tax types need not reapply.

Are there any special arrangements to file returns?

Yes. The following Tax Offices will be opened an hour later on March 15, to facilitate persons wishing to file their income tax returns:

Kingston; Constant Spring; Cross Roads; Mandeville; May Pen; Spanish Town; Portmore; Montego Bay; Savanna-La-Mar; Morant Bay; Brown’s Town; St Ann’s Bay; Falmouth; and Lucea.

Persons may contact the Tax Administration Customer Care Centre at 1-888-TAX-HELP (1-888-829-4357) for additional information and assistance.

Conclusion of special series running up to the March 15 due date for the filing of income tax returns