Commentary: Criminalising tax advice
Sometime ago, a tax auditor was forced to discontinue investigating a certain taxpayer. The auditor was warned that the taxpayer has written his name on parchment paper and buried it under either a sycamore or guango tree - I can't recall which - somewhere in the May Pen Cemetery.
It was widely felt that this taxpayer was associated with the dreaded Dr L.W. de Laurence, the master of occultism and obeah in Jamaica.
I am quite sure that if this threat had happened today, it would be an offence under the Tax Penalties (Harmonisation) Act 2014, passed in the House of Representatives last September and took effect October 1, 2014. It amended, harmonised and increased penalties under the Education Tax Act and the Income Tax Act.
The amendment while expanding the range of offences also increased fines and jail time for committing existing offences. These offences ranged from non-filing of returns to non-disclosure such as managing funds on behalf of a non-resident or that a wife is being paid from the business.
In most cases, a taxpayer could experience criminal charges, fines and jail time. Accordingly a taxpayer found guilty, can be fine in a Resident Magistrate's Court for up to $2 million or imprisonment of up to one year.
Tax evasion is a type of criminal offence where a taxpayer wilfully uses illegal means to conceal or misrepresent financial details in order to evade and avoid paying taxes. If convicted, it carries up to 12 months in jail and $3 million in fines and penalties or three times the tax, whichever is greater; or is subject to both fine and imprisonment.
This is different from filing an incorrect tax return; it includes aiding and abetting a person to commit the offence. However, filing an incorrect or false return is itself a criminal offence and a form of fraud more common than tax evasion, but less severe.
It is one thing to make a disclosure to the taxing authorities of your tax liability, but is unable to pay; it is quite another to have acted in violation of the tax laws with the intent to evade and defraud these taxes which can result in civil penalties or criminal prosecutions.
In some instances, the taxpayer can be liable, on conviction in a circuit court, to a fine, and in default of payment, imprisonment for up to 10 years.
In the case of the threat referred to in the opening paragraph, the law provides that any person who does any act that serves to hinder, obstruct or assault, threaten or intimidate a tax agent, without lawful excuse, or who refuses to comply or impersonates a tax agent, can be fined up to $500,000 or can be imprisoned for up to six months by a Resident Magistrate's Court.
Most of us who advise on taxation have mixed feelings on these reforms, while it appears not to bother some as yet. Some are of the impression that our Government in general has little care for the effects these tax measures can have on the psyche of small businesses, some of whose sales are far below these fines.
Perhaps the laws are just on the books to make the IMF see that we are being tough on tax offences and hence deserves a passing grade in the exams. Some point to similar provisions in our Uncle's jurisdiction, while others are of the view that no judge will actually sentence a businessman to jail time.
"Pay no attention to that man behind the curtain," as Dorothy and her companions were told by the Wizard of Oz - because the man behind the curtain was in fact the Wizard himself who had no magical powers. We should never have to say this about our courts.
Back in the 1980s, the Guyanese dollar plunged to a rate of G$10:US$1 while our currency was J$5:US$1. This writer was in college at the time and argued convincingly that "it couldn't happen to this country - it would mean civil unrest or even war". Today, our dollar is J$112:US$1 - and climbing. The point here is never say never. It takes one judge having a bad day and, in protecting the dignity of the court, snapping and doing the hitherto unthinkable.
n Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston. Email firstname.lastname@example.org.