In April this year, Tax Administration Jamaica (TAJ) announced that its methods of collecting taxes would be strengthened via introduction of a garnishment policy under the Tax Collection (Miscellaneous Provisions) Act 2014 (TCA). Garnishment is a process by which a creditor may collect money owed to him by a debtor directly from another person that has funds for that debtor.

A main feature is that a garnishment notice issued by the TAJ Commissioner General does not require a Court Order to take effect. Garnishees, according to the TAJ, include attorneys, bankers, lessees and tenants, third parties involved in trading or contractual relations with the delinquent taxpayer, and employers.

This article takes a look at the TAJ’s policy and its impact on banks and law firms.

The Constitution

The Charter of Fundamental Rights and Freedoms (the Charter) prohibits anyone from compulsorily taking possession of a person’s property, including money, except where the law prescribes the principles on, and the manner in which compensation is to be determined, and the person claiming an interest over such property has a right of access to court in order to:

• Establish such interest or right

• Determine the compensation to which he is entitled; and

• Enforce his right to any such compensation

Property is defined in law as including money, goods, things in action, land and every description of property, whether real or personal.

However, the Charter stipulates that the protection of property is not to be affected by the making, or operation, of any law that provides for the taking of possession or acquisition of property for, among other things,:

• Satisfaction of any tax or rate

• Execution of judgments or orders of courts

The TAJ and the Law

In keeping with the exception relating to taxes due, the TCA gives the TAJ the power to require that persons (third parties) holding, controlling, or having custody of, monies belonging to a tax debtor, to pay that money over to the TAJ’s Commissioner General upon being served with a garnishment notice. This is also applicable where a person will, within one year, be liable to make a payment to a tax debtor. The notice issued by the Commissioner General to the person holding the tax debtor’s money is sufficient. No court order is necessary.

The TAJ, however, may not take any action in respect of recovery of a tax debt unless:

• The tax debtor has acknowledged in writing (including by tax return) the amount owed and that it has not been paid by him;

• The time for making an objection to or appeal of the debtor has expired and the amount has not been paid;

• In the event of an objection or appeal, the objection or appeal has been finally determined, and the amount owing has not been paid; or

• The amount has otherwise been finally determined by a court, and it has not been paid.

Compliance by Financial Institutions

The Banking Services Act (BSA) prevents an officer of a licensee, with access to a customer’s information, from giving, divulging or revealing any information regarding the money or other relevant particulars of the customer’s account. However, under the BSA an officer is not prevented from doing so where:

• the licensee has been served with a court order attaching money in the customer’s account, or

• disclosure is permitted or required under another Act of Parliament

The TAJ garnishment policy has come about by virtue of another Act of Parliament and consequently a banker who, in good faith, in compliance with the provisions of the TCA, discloses an account holder’s information would not contravene the confidentiality requirement imposed by the BSA.

It is noteworthy that in the case of a joint account, its balance is available only to satisfy a garnishment notice in the joint names appearing on the account.

Additionally, a financial institution’s right of set-off is likely to be preserved. That means, if a debt owed by the debtor is currently payable or payable in the future to the financial institution but the financial institution receives a garnishment notice regarding the debtor, then in both instances the claims may be set off by the financial institution, prior to paying out to the Commissioner under the garnishment notice.

Nothing new

The direct recovery of tax debts without a court order is by no means a new concept. It is perhaps best known of in the United States where the Internal Revenue Service has the ability to place a levy on bank accounts without a court order.

Similarly, in Australia, the law allows the Commissioner of the Australian Tax Office to utilise a garnishee order for the recovery of tax debts from third parties which owe money to, or hold money for, a tax debtor, without a court order. Such third parties are likely to be an employer, a contractor, a financial institution or someone holding money on a debtor’s behalf.

In Canada, the tax authorities may issue a “requirement to pay” to third parties such as a bank. It is the same thing as a garnishment notice.

The UK Government’s department of Revenue and Customs, in its policy paper of February 2016 has signalled its intention to introduce enforcement by deduction from bank accounts as a new way to recover taxes owed.

However, in the UK, a rather compassionate stance is being taken towards direct debt recovery, as tax debtors who are identified as vulnerable will not be considered for this form of recovery. They will be given alternative support to help them pay the money they owe. Vulnerable debtors in the UK include those who have personal issues, temporary illnesses, physical or mental health conditions, long-term disabilities and lower levels of literacy, numeracy and/or education.

TAJ’s Dream — Attorneys’ Nightmare

The Legal Profession (Canons of Professional Ethics) (Amendment) Rules, 2014 issued under the Legal Profession Act (LPA) expanded the circumstances under which an Attorney may reveal confidences or secrets of clients. They are as follows:

I. Where it is necessary to establish or collect his fee;

II. To defend himself or his employees or associates against an accusation of wrongful conduct;

III. In accordance with the provisions of the Proceeds of Crime Act and any regulations made under that Act;

IV. In accordance with the provision of the Terrorism Prevention Act and any regulations made under that Act; or

V. Where the Attorney is required by law to disclose knowledge of all material facts relating to a serious offence that has been

committed.

In the ordinary case, the TAJ’s policy does not appear to fall within the list of circumstances in which disclosure is permitted.

It is arguable, therefore, that the TAJ’s policy cannot suffice to compel an attorney to disclose his client’s confidential information if it causes him to breach his professional duty of confidentiality, in order to facilitate the garnishment.

It would appear that the TCA and the LPA are not aligned on the issue of an attorney’s ability to comply with a garnishment notice. Perhaps clarification of the TAJ’s Policy in relation to attorneys lies ahead in our courts of law.

Rachel McLarty is an associate at Myers, Fletcher & Gordon and is a member of the firm’s Litigation Department. Rachel may be contacted via rachel.mclarty@mfg.com.jm or you can visit the firm’s website at www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.