THERE is a gap in tax filings among Jamaica’s small and medium-sized enterprises (SMEs), leading to penalties and interest charges for unfiled or late returns. The issue was highlighted by tax accountant Cyreca McGaw-Smith, who noted that many business owners are unaware of their tax obligations, with poor record-keeping practices and misconceptions about income thresholds contributing to the problem.

“They are of the opinion that if they are registered and they have made a loss or they have not traded at all, then they are not obligated to declare any income tax for a particular year,” McGaw-Smith, CEO of McGaw & Company, told the Jamaica Observer.

She explained that in such cases, tax returns go unfiled, but the Tax Administration Jamaica (TAJ) platform still requires a return to be submitted. Failure to file on time leads to automatic penalties and daily accruing interest, which can add up significantly. McGaw-Smith noted that years of unfiled tax returns are common among SMEs, often discovered when an accountant reviews their TAJ account. Drawing on her 14 years of experience, she emphasised that many small business operators lack the necessary knowledge to navigate tax compliance effectively.

“Let me tell you something about the Jamaica business owners,” McGaw-Smith told the
Business Observer. “They know how to make money. So most of the time they will penetrate on the sales. They will not keep proper records of their expenditure. And this is very, very common.”

When tax season arrives, she notices that many small business owners struggle to account for their income due to inadequate record-keeping. She noted that some fail to track expenses effectively and often mix personal and business expenditures, which are not eligible for tax claims. There is also a misconception about income thresholds, with many business owners believing that if their earnings are $3 million or less, they are not required to pay taxes. McGaw-Smith debunked this, stating that it is not the case. Under Jamaica’s income tax law, all individuals or businesses must file an income tax declaration, regardless of whether they made a profit, incurred a loss, or engaged in no trading. McGaw-Smith explained that filing is crucial for the Government to assess an entity’s activities and ensure compliance.

“If they don’t do anything, they’re just going to assume that you are evading taxes,” she revealed.

The Business Observer reached out to Meris Haughton, chief corporate communications officer at the TAJ, to gain insight into the number of SMEs lagging in their tax filings. However, she was unable to provide specific figures, explaining that the data is divided into three categories: registration, filing, and payments, all of which contribute to compliance. Haughton did acknowledge that some SMEs do not file at all, which is why the TAJ organises annual programmes to assist businesses during the income tax filing period. One such initiative is the Special Taxpayers Assistance Program, launched each year on February 1st, which specifically targets small business operators.

“You do have some persons who do not comply, and we have others who are not fully aware of their obligations, which is why we have the programme to assist them,” Haughton explained, steering clear of labelling SMEs as delinquents.

Tax returns must be filed by March 15th each year, covering the previous year’s income. In addition to the actual tax return, businesses are also required to file an estimated income tax for the current year. For example, in March 2025, businesses will file their tax returns for 2024 and submit an estimated return for 2025. Failure to file on time results in a penalty of $10,000 per month, with a maximum fine of $1 million. This penalty is separate from interest, which is calculated daily.

Despite efforts by business agencies to educate SMEs on their tax obligations, McGaw-Smith points out that another underlying issue is the reliance on professionals, such as accountants, to handle tax matters. She also highlighted a common misconception that accountants are expensive, which often leads SMEs to avoid hiring them, and some accountants are not fully knowledgeable to advise business owners properly, resulting in more distrust among business owners.

“I have had clients who come to me because they have, you know, either can’t find their accountant or their accountant has, you know, caused them to be in a particular situation because they weren’t advised properly.” She revealed.

To provide further support, McGaw & Company is hosting a tax preparation webinar on January 15, specifically designed for micro and medium-sized businesses. With tax season fast approaching, the webinar aims to educate business owners on the requirements for filing tax returns. Participants will learn about the necessary documentation, the forms to be submitted, deadlines, and the individuals responsible for filing. McGaw & Company will also cover the types of expenses that can be claimed to reduce tax liabilities, as well as available credits and allowances for both businesses and individuals.