THE Institute of Chartered Accountants of Jamaica (ICAJ) is proposing the application of a flat tax rate for operators in the informal sector as an equitable and efficient strategy to improve tax compliance.

Vice President of the organisation and tax consultant, Ethlyn Norton-Coke, who made the submission during a meeting of the Committee on Tax Measures yesterday at the Ministry of Finance’s Heroes Circle offices in Kingston, said the government needs to “get more money” out of the sector.

She suggested that persons in the informal commercial sectors such as taxi drivers and vendors, who often escape the government’s tax net, should pay a set rate for operating their businesses.

“They make money but they are not filing a return or anything. Charge them a flat rate, whether it is $15,000 or $30,000. If they feel that amount is too much then they can file a return, because right now, you (government) are not getting much out of them,” she told Committee members.

Member of Parliament for South St Andrew Omar Davies questioned the practicality of the proposal from the ICAJ, noting that it would be difficult to charge a “fair flat rate” to persons involved at different spectrums of the commercial sector.

“That would need to be worked out because you have so many layers. You have used the example of the taxi driver, but what about the two bananas, one orange person at the traffic light. How do you deal with that?” he questioned.

In response, Norton-Coke suggested that if persons do not believe they can afford the flat rate based on their income they can file a tax return.

Minister of Industry, Investment and Commerce Dr. Christopher Tufton, however pointed out that the filing of tax returns would present a challenge for many persons in the informal sector as they often fail to keep current and accurate records of their finances.

“They often have no records of their transactions and you would have to guide them in terms of how they actually go about filing these returns,” he stated.

Dr. Tufton said that in pursuing the principle of a flat tax, a public education and sensitisation drive would have to be carried out, so that persons could understand the importance of record keeping as it relates to filing tax returns.

Norton-Coke, in acknowledging the concern, noted that most collectorates have the facility to assist taxpayers in filing their returns, but the service is often not utilised.

Minister of Finance Audley Shaw tabled the Green Paper on tax reform in the House in May, which seeks to address the inefficiencies and complications in the country’s tax system; enhance compliance levels; broaden the tax base, and simplify the overall revenue system.

The last major tax reform took place from 1986 to 1991, when the General Consumption Tax was introduced, while various reform measures, some from the 2004 Matalon Tax Policy Review, were implemented in 2005.

The Green Paper states that despite the enhancement measures introduced from 1991-2005, the imbalance and complexity of the tax structure have not been meaningfully addressed.