Going after tax cheats
Everald Dewar, Guest Columnist
In its July 14, 2014 publication, The Gleaner reported that Ainsley Powell, commissioner general of Tax Administration Jamaica (TAJ), will be going after $20 billion in tax arrears owed to the State by delinquent taxpayers.
The commissioner general said TAJ was "prepared to sell properties where the court has ruled in favour of the revenue for levy due to delinquency".
How much of this $20 billion is really owing? In other words, how much is due to taxpayers agreeing to or admitting liability; how much is due to bizarre and inexplicable outstanding assessments made by the 'computer system' or the manual making of disproportionate assessments on delinquent taxpayers; how much of this arrears is under objection or appeal?
How much is due to incurable problem of the automatic allocation of tax payment to interest and penalties first, as the late Ethlyn Norton-Coke suggested - God rest her soul - is likened to a lot of gremlins somewhere in the system?
How much is due to the ignoring or refusal of the TAJ to accept revised return where the revised return has liability that is less than that originally filed, thus creating havoc in the taxpayer's record?
And how much is due to the extortionate interest produced by the 40 per cent rate existing up to 2010? Perhaps I better stop here and give two actual examples.
John - not his real name - got into some financial difficulties and could not pay his creditors, including his tax bills. He suddenly left the area, disappeared, and did not pay my bill either - please remind him for me if you see him.
Hence, an original tax bill of $1.6 million has now clocked up a sizable sum of over $18 million due to estimated assessments over many years. John cannot keep a low profile forever and eventually it will catch up with him.
A wife-and-husband partnership was audited and assessed for over $24 million in taxes for a six-year period. As the business was reflecting turnover of less than $11 million over the same period, it was clear that if such a proposition was accepted, then the taxpayers would be put out of business, together with their 12 employees and occasional outworkers.
The revenue agent confirmed the assessment. This writer was called in to help. Objecting to the assessment remained the only option, however, the time period in which to do so had passed. Moreover, no matter how outlandish an assessment made by the TAJ, the burden of proof is always on the taxpayer.
This is the kind of job I hate. The battle has already been lost but someone asks you to take up arms. While taxpayers sometimes fails to understand their predicament, it is equally true that the revenue authorities refuse to take a realistic view when carrying out their investigations.
With the elimination of ministerial discretionary powers to grant tax waivers what these two taxpayers need, is a write-off of the uncollectible portion of these liabilities to get some breathing room. Legislation was recently introduced to have a debt write-off policy for tax arrears.
The Tax Collection (Amend-ment) Act 2013 and Tax Collection (Write-off) Regulations 2013 is a welcome omen. TAJ has now set up a tax debt-arrears management system which include provisions for the ranking of debt and the criteria for determining if a debt is uncollectible.
Under the regulations, the TAJ will determine whether any debt is uncollectible on reasonable grounds, such as whether an individual taxpayer is unable to pay the debt, based on his specific circumstances; and in the case of a corporate taxpayer, based on consideration of its financial position and that of its directors and shareholders. An individual taxpayer who is deceased should have no known estate or assets.
The act provides that, in the case of a taxpayer who is an un-discharged bankrupt without assets, the trustee should indicate that he does not foresee any further payments to the Government.
To determine the ability of an individual taxpayer to pay the debt, the TAJ may require the taxpayer to make a declaration as to his income and expenditure, assets and liabilities, while in the case of a company, the responsible officer would make the declaration.
The criteria are stringent but, under the circumstances, this legislation offers a ray of hope.
Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston.email@example.com