Employment tax credit barely moves the needle on compliance
The Jamaican Govern-ment's new scheme to incentivise the on-time filing of monthly tax returns, the employment tax credit (ETC) has had minimal impact a year into its introduction.
Since the introduction of the scheme, Tax Administration Jamaica (TAJ) said that between March and November 2014, only about 30 per cent of employers have been meeting the monthly deadlines for payment of statutory deductions.
"The change that we have seen is marginal," said Meris Haughton, director of communications for Tax Administration Jamaica. "I would say it is about three per cent".
As part of the Government's fiscal incentives regime, the employment tax credit was introduced on January 1, 2014, allowing designated employers to claim a credit against income tax, based on statutory payroll deductions.
Employers, on filing of their annual returns in March of each year, can claim a rebate from statutory deductions. The rebate claimed should be no more than 30 per cent of profit reported.
However, if the filings are even a day late beyond the 14th of the month, they would be deemed non-compliant, and the company would be unable to claim credit for that month.
The deductions relate to education tax and contributions to the National Housing Trust (NHT), National Insurance Scheme (NIS) and HEART Trust/NTA. It does not include PAYE or income tax.
Employers may claim the total amount of their payroll statutory contributions - both the employee and employer portions - declared and paid on time for that year.
The education tax is 5.75 per cent of salary; NHT is five per cent; HEART Trust is three per cent, and NIS, five per cent.
"To be eligible for ETC, employers needs to file or pay monthly statutory obligations - the S01 - by the 14th of each month," said Haughton.
"Only the amounts paid or filed on time will be eligible for the ETC," she said.
The filing deadline for the annual income tax return, on which the ETC is to be claimed is March 15 of each year.
Not all employers are eligible to claim the ETC. The scheme excludes regulated companies such as those supervised by the Financial Services Commission, the Bank of Jamaica, the Office of Utilities Regulation or the Ministry of Finance; persons operating in the bauxite and alumina industries; persons operating as a group head office company; as well as persons operating under the Jamaica Export Free Zones Act.