Mon | Sep 25, 2017

Everald Dewar | More tax pain, penalties and imprisonment

Published:Wednesday | October 21, 2015 | 10:00 AM
Everald Dewar

Over the last twelve months, taxpayers and their advisers, in concentrating on the various changes in the tax system, may have totally overlooked the new development that took effect on October 1.

This is the coming of additional penalties and fines on income tax and education tax.

First of all, it is now mandatory that every person, including "companies, charities, trust and individuals", must file income and education tax returns on or before March 15 of each year. It matters not whether that person has tax to pay.

The consequences of failure to submit tax returns within the time limit have been further compounded for the taxpayer. There are many traps that now lie ahead.

The imposition of penalties, interest and court actions will bring new and painful experiences. The judiciary directly representing 'the power and authority' vested in the Crown can impose fines and confinement or imprisonment.

Penalties & Interest

Late submission or failure to submit tax returns will now attract a penalty of $5,000 for each month until the taxpayer complies. This will not go beyond a maximum of $1 million.

The existing law provides that where there is an act of falsehood, wilful default, fraud, or an art of contrivance, there is potential for the imposition of a penalty of up to 300 per cent of the tax - the penalty applies not to amount incorrectly returned, but the amount which should have been returned.

This penalty is more likely to be applied in investigative cases, but these days, one never knows.

Where there is wilful failure to disclose artificial transactions between connected persons, under the new provisions, in proceedings before the court ,this can attract a $2 million fine. In default of payment there could be imprisonment of up to one year. The difference to prior provisions is that the test for imposing this new penalty is for wilful failure or neglect and not for fraud or falsehood.

Now, this measure is either not yet implemented or is not fully operative - or the authorities will not impose penalties until a decision is made on how to administer it - but where a person fails to file and declare estimated income tax, or if he fails to deliver the return within 30 days of a notice served on him, he can be liable to a penalty of up to $1 million. There is a further penalty of $2,000 per day until he complies.

There are also penalties relating to payments in respect of pay-as-you-earn (PAYE) deductions from employees and tax deducted from suppliers of specified services not holding exemption certificates. For example, if an employer fails to declare PAYE deducted from employees' salaries within 15 days of the following month, he commits an offence and if convicted, may be fined up to $1 million or imprisoned for up to one year.

INdividual declarations

Where a person in receipt of money belonging to a non-resident either refused or neglected to give account to the Commissioner of Tax Administration Jamaica when requested to do so, he or she may also be up to $1 million or imprisoned for up to one year in default of payment.

It should be noted, however, that unpaid Minimum Business Tax remains at a monthly penalty of 1.5 per cent.

This writer is again making the call for the legislators to give some help to taxpayers in cases where innocent mistakes and errors are made and not punish and endanger businesses that are vulnerable.

We know it to be true that the law in its best estate 'is an ass' and that the authorities may or may not have the willingness, where they could, to lay aside their chastising rod and its terrible majesty. It is an inexplicable mystery why there is no assisting the many taxpayers who are willing to correct errors and revise tax returns but avoid doing so because they fear pending penalties.

Penalties and interest are in effect disguised additional rates of tax and taxpayers would do well not to ignore the new provisions. They complement the 2013 amendments to the Revenue Administration Act, which imposed stiff fines and or imprisonment on persons failing to provide information requested or who give inaccurate or incomplete information to the revenue authorities those fines were moved from $200,000 to $2 million.

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

everald.dewar@bdo.com.jm