Sat | Dec 10, 2016

Dealing with a tax-crime case

Published:Sunday | September 7, 2014 | 12:00 AM

Everald Dewar, Guest  Columnist

You have just received a court summons telling you that you have not paid taxes, which is against the law and against the peace of our 'Sovereign Lady the Queen Her Crown and Dignity', and that you are required to appear in 'Her Majesty's name' at the courthouse on such and such a date.

You immediately panic, first things that come to mind are judgments, orders, fines and imprisonment.

You thought your accountants were dealing with your tax affairs; after all, you pay them enough.

You are about to pick up the telephone to speak to your accountant when you remember their last statement about your unpaid account. Better not embarrass them. You think of your attorney but he may charge more than the tax owing.

Moreover, this is not really a legal problem but more a compliance issue.

You decide to attend the hearing and are standing nervously waiting in a dreary building. You know that at the end of the day there will be some tax to pay.

You are thinking that you don't have it, so you need to find some way of putting off the evil day. How? By asking the magistrate for an adjournment, which will buy you at least another two months. But Your Honour will need to be persuaded to adjourn the hearing. How should you present your case?

The most popular excuse is: 'I don't know. I have to speak with my accountants as they have all the information'.

In technical jargon, this is known as 'an ignorance problem'. Be careful how you overplay the ignorance card. Quite often the tax collector will not agree. She will object before you even have the chance to speak and tell the magistrate she is asking for an order for you to pay something. If the magistrate shows signs of wanting to determine the matter right now, you are in danger!

If you never had an accountant, try acting dumb - misunderstanding everything that is said to you. The judge may adjourn the case to preserve her own sanity.

Alternatively, play the barrack-room lawyer and argue every point in minute detail. This may secure at least one adjournment. The judge may say to the collector, 'I think you need to arrange a meeting with Mr Jones to discuss these technical points before I hear the case again'.

Next time you may need a higher grade excuse to have another adjournment. But be aware that the magistrate will eventually lose patience and determine the case without warning.

A law-abiding businessman can end up being treated as a highway robber and threatened with imprisonment. The magistrate might even remind the accused of what happens while in police custody - he will not last the night.

The reality here is that tax hearings are civil, but basically criminal in nature. The laws impose fines and confinement - for example, under the Revenue Administration Act, the commissioner general may require any person to furnish information.

Failure to comply would mean committing an offence and on conviction an indictment in a circuit court, liable to a fine of $2 million or imprisonment for a term not exceeding 10 years, or both such fine and imprisonment.

The penalty for failing to comply with a request made during the course of a tax audit is $1 million. The commissioner general may give notice requiring any person to attend before him and give evidence.

A person who fails to comply commits an offence and is liable to pay a fine of $2 million for the first offence, and $5 million for the second offence, or imprisonment for up to 10 years, or both the fine and imprisonment on conviction in a circuit court.

There is a penalty of $2 million for obstructing or hindering an authorised person in the execution of his duties .

Finally, Section 19 of the Revenue Administration Act makes it possible for the minister of finance to make regulations in respect of a breach of any provision that will impose penalties on conviction in a resident magistrate's court of $2 million or imprisonment for a term not exceeding 12 months, or both fine and imprisonment.

The perception among many practitioners and accountants is that the tax laws and justice system are ultimately criminal in nature and slanted too much in favour of Government and inhibits the right of taxpayers.

Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston.everald.dewar@bdo.com.jm.