The novel coronavirus (COVID-19) disease pandemic has come at a time when millions of people around the world are looking to finalise their financial year and settle their 2019 tax liabilities.
In many countries where taxpayers expect tax refunds, they look forward to using these funds to go on vacations, make significant purchases, and generally engage in activities that fuel economic growth.
These “normal” activities take on new meaning and significance given the uncertainty of the global economic outlook and the new normal that we all now face, including school closures, social distancing, forced unpaid vacation for some, and new work-from-home requirements for others.
While most people would prefer to completely skip tax season altogether it is important to maintain some normality, both in our personal lives and in our businesses, despite knowing that COVID-19 will certainly result in some adverse economic and financial effects.
What can we do to manage our tax obligations even as we work to manage the risks of the COVID-19 crisis? Below are some available options, as well recommendations for government and private sector consideration.
INCOME TAX FILING EXTENSION & ADJUSTING 2020
Tax Administration Jamaica (TAJ) has extended the deadline for filing income tax returns, both for businesses and individuals, until March 25, 2020.
For those taking advantage of this filing extension, this is also the time to consider whether your 2020 estimated taxes should be adjusted to reflect expected change (downturn) in 2020 revenues and/or net income. Section 65(3) of the Income Tax Act provides that taxpayers may make an application to the commissioner to use an estimated chargeable income (other than the amount in the preceding year) if the taxpayer believes that his chargeable income (2020) is likely to be less than the amount in the preceding year.
Taking this approach could soften the cash flow impact for many businesses and provide a way to immediately reduce the economic implications that many will face in the next few months. We would hope that the commissioner general would use his discretion to approve these types of requests.
In the US, tax payments which are normally due with returns by April 15, 2020 have now been deferred until July 15, 2020. We also hope that the Government of Jamaica (GOJ) would consider making similar concessions for Jamaican taxpayers for settlement of final income tax payments for 2019, and for 2020 estimated first-quarter income tax payments normally due by March 15th.
UTILISE TECHNOLOGY AND TAJ ONLINE PLATFORMS
With mandated quarantine, including work-from-home schedules and social distancing, these circumstances provide an opportunity to take advantage of the TAJ's online platform, which offers:
￭Online Taxpayer Registration — Allows taxpayers to create an online account for filing of their returns. Simply go to www.jamaicatax.gov.jm/, and click on 'Login' in the upper right corner of the screen to create an account.
￭Online/ E-Filing of Returns – Once a taxpayer is registered online the platform can be used to conduct several important transactions, including communicating with the TAJ, completing and preparing various tax filings, and obtaining other useful information in managing your tax obligations.
￭TAJ Online Application for Tax Compliance Certificates (TCC) – Allows taxpayers to apply for TCCs, providing additional tax clearances have been obtained from National Housing Trust and National Insurance Scheme (NIS).
TAKE ADVANTAGE OF NEW TAX MEASURES & FISCAL STIMULUS TO CUSHION BLOW
General Consumption Tax (GCT) reduction from 16.5 per cent to 15 per cent — Businesses should ensure that they put in place the necessary tools to implement this change, which comes into effect April 1, 2020. As GCT forms part of the cost of goods sold for many businesses, this reduction should be a welcome relief that can have a positive impact on cash flows.
New MSME Tax Credit — This measure provides micro- small & medium-sized enterprises (MSMEs), with annual revenues less than or equal to $550 million, a non-refundable tax credit of $375,000. This credit can be used in addition to the employment tax credit (ETC) which provides a credit equivalent to the lesser of: (i) 30 per cent of the income tax liability or (ii) employee and employer statutory contributions (excluding PAYE). MSMEs should take these credits into consideration when planning cash flows and tax payments.
The Government has also promised to inject $25 billion into the economy, which is aimed at combating the economic effects of the COVID-19 pandemic. These measures include the following:
REDUCTION IN REGULATORY FEES FOR COCONUT, COFFEE, COCOA AND SPICE FARMERS
Waiver of Special Consumption Tax on approximately 100,000 litres of alcohol for use in making (or substituting for) sanitisers that will be donated to the National Health Fund and Ministry of Health.
Waiver of Customs duty on the importation of masks, gloves, hand sanitisers and liquid hand soap for a 90-day period.
The Government also plans to introduce the COVID-19 Allocation of Resources for Employees (CARE) programme, which includes:
Business Employee Support and Transfer of Cash (BEST Cash) — This will provide temporary cash transfers to businesses in targeted sectors based on the number of workers they keep employed
Supporting Employees with Transfer of Cash (SET Cash) — will provide temporary cash transfers to individuals, in cases where it can be verified that they lost their employment since March 10th due to the COVID-19 pandemic.
Special soft loan funds will be made available to assist individuals and businesses that have been hard hit.
Special COVID-19 grants will also be made available to support poor and vulnerable people.
The Government has indicated it is currently working on finalising details for the implementation of these programmes, so it is critical for taxpayers to stay abreast of developments as we continue to navigate this disruptive time.
ADDITIONAL TAX SUPPORT REQUIRED
From a tax perspective, we would also want to see the Government move to enable legislation that provides, at a minimum, the following:
Proactive payment arrangements—This would see the TAJ proactively making an offer to compliant taxpayers for settlement of outstanding liabilities at no or low interest rates. For example, the tax liability could be capped at a specific amount and could be aimed at MSMEs to ensure that they can stay in business following the COVID-19 emergency period.
Offer in compromise—Allowing taxpayers to offer a reduced amount for settlement of tax debts where, for example, there is a doubt as to the liability, where the debt is uncollectible, or simply to achieve effective tax administration.
Enhancement of the MSME credit —Making the MSME Tax Credit refundable to allow for greater cash flow support to small businesses.
Tax Compliance Certificate (TCC) —Improving the efficiency of the TCC application process by removing the bureaucracy and empowering the TAJ to issue NHT and NIS clearances as part of the process.
Moratorium on Tax Penalties—During the COVID-19 emergency period, the GOJ should consider a moratorium on assessment of tax penalties and interest.
Over the past few years the GOJ has made strides in improving Jamaica's economic growth and reducing its debt burden and, despite the COVID-19 disruption, the economy has not shut down. This means there still remains a bright light at the end of the tunnel. Let us adjust our lens and look at the opportunities and options for us to ride this wave in a responsible and proactive manner, and work together as taxpayers and citizens to navigate the risks associated with COVID-19.
For further information or assistance with your tax-related concerns, contact Sygnus Tax Advisory at 876-634-5005. At Sygnus Tax Advisory we are focused on our clients, our people and our communities to build awareness of taxation and to solve our clients most difficult tax issues.
Dionnie Headley is managing director of Sygnus Tax Advisory