Denning: Low tax compliance not an imaginary problem
Tax expert and partner at PricewaterhouseCoopers Jamaica, Brian Denning, is urging the Jamaican Government to tackle the issue of tax compliance, a problem he says is far worse than many Jamaicans imagine.
Research done within the last three years in the preparatory stage of work on tax reform, he said, revealed that the pool of taxpayers is small compared to the potential numbers that should be contributing to the treasury.
He said the non-compliant span both the personal and corporate income tax segments.
Just about 3,500 companies were paying taxes from a pool of some 63,000 registered at the time of research, with many more making nil returns, said Denning on Thursday while addressing a meeting of Kiwanians in Kingston.
He said the compliance measures introduced in the 2015/16 Budget tabled in Parliament offer a good opportunity to reach the non-compliant.
"We make assumptions about where the burden of taxes in the country lies. It is believed that the PAYE worker bears the burden … but it's also only certain workers who are bearing the burden - it's not all employed persons,” said Denning.
“We have a labour force in Jamaica of about 1.3 million. Of that, less than 330,000 are actually in the PAYE net as being registered. Of that 330,000, over 120,000 are actually being reported as being below the income tax threshold. So when you look at the numbers, just about 200,000 in the entire country contribute."
Denning added: "If you think that’s bad, when you go to the self employed it’s a complete disaster. Of about 25,000 registered, a lot less pay taxes.”
He noted that among the newly introduced compliance measures is a three per cent withholding tax on local service fees paid by large entities. The Finance Ministry, he said, is also pressing ahead with removing the zero rating for GCT on supplies to government. There is also some update on excise duties, fines and penalties.
On the new withholding tax, Denning said this will serve as a tax credit and therefore act as an incentive for companies to collect it.
Tax advisers in the past, he noted, had recommended some 88 administrative steps that can be taken to improve collections, and it was hoped that the government would now move ahead to implement them.
Denning said Government should also consider making tax compliance certification a requirement for key government services including renewal of driver’s licences. And, he recommended a period of amnesty on property taxes for owners whose holdings are untitled or unregistered, so that their titles can be regularised – enabling the Government to collect taxes going forward.