Thu | Jan 24, 2019

Commentary: Criminalising tax infractions might be self-defeating

Published:Wednesday | May 6, 2015 | 12:00 AM
Everald Dewar

Recently, an IT technician at Tax Admini-stration Jamaica (TAJ) was arrested for tax evasion, tax fraud and breaches of the law for allegedly, along with taxpayers, defrauding TAJ of more than $1 billion.

While this was a matter involving the police's Major Organised Crime and Anti-Corruption Task Force (MOCA) and the Revenue Protection Division (RPD), the vast number of cases that go to the tax courts are civil, that is, cases worked towards money settlements rather than prosecution.

However, recent amendments to the tax laws have expanded offences and imposed criminal sanctions to almost all offences. These offences give rise to penalties which can run into millions of dollars and are punitive rather that compensatory.

In practice, the authorities normally treat tax matters on a civil basis, where additional tax and corresponding interest is financial compensation for the Crown. However, a penalty is a punitive imposition. Any case brought before the courts involving penalties is likely to be considered criminal. The TAJ now has the option of working all its prosecutions to criminal standards and must consider the impact of such an action.

In my experience, issues of additional tax is resolved by negotiation, usually based on a balance of probabilities, perhaps by way of business-economics models, or private expenditure exercise, and no need to prove a case beyond a reasonable doubt, as would be required in all criminal matters.

In criminal proceedings, the taxpayer must be presumed innocent from the outset and the onus will be firmly on the TAJ to prove its case to the appropriate standard. It should not be difficult to imagine a situation where the TAJ successfully obtains a decision to impose further taxes and interest but cannot prove its case for penalties. The court may choose not to impose a penalty or reduce the penalty to nil where there is no allegation of wrongdoing, there will not be any tax-geared penalties, although this is not necessarily so under these legislation.

A key question in any case will be whether the matter is a civil or criminal one. In some instances, the taxpayer can be liable, on conviction on an indictment in a Circuit Court, to a fine, and in default of payment be imprisoned for up to 10 years. Indictments are used for particular offences of a more serious nature.

In the case of serious fraud, the TAJ may accept a money settlement on full disclosure instead of taking criminal proceedings. As in most cases, Director of Public Prosecutions Paula Llewellyn may say that 'no criminal prosecution can be mounted against' the taxpayer as it is difficult to prove criminal intent.

A word of advice: Whenever you are brought before the tax courts, do not be offensive to the judge in deed or thought, thinking that this public official is making life difficult for you and that you are been being terrorised, and falsely or unjustly prosecuted. Neither should you act with reproach and revile or retaliate against prosecutors. Neither be ye ashamed that you are being brought before the court.

The magistrate or judge is not just some baleful prima donna for justice, an avenging angel to right a wrong. The judge is there to help bridge the gap between yourself and your prosecutors. Be respectful and polite.

As was taught to me at Mother Sol's basic school: 'To be polite is to do and say the kindest things in the kindest ways'.

Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston.