Everald Dewar | Garnishment and tax refunds
A person recently called to ask about Garnet Schee. To clarify, he said "Mr Schee will take the money from anyone who owes you to pay the tax you owe."
He meant 'garnishee'.
I explained to the hapless caller that it was not the name of a person, but that it relates to a legal process. It is somewhat similar to what plays out in loan repayment by salary deduction, where the employer deducts an amount from the employee's salary and pays it over to the financial institution to which the employee owes money.
In the case of taxes, the tax commissioner may order anyone holding money for a taxpayer including banks, lawyers and tenants to pay the sum to the tax authority to clear taxes owed. It contemplates the intercepting of loans or other advances to the taxpayer while the garnishee order is in effect.
Garnishment seems the opening prelude to what the prime minister and his finance minister hinted at as 'enforcing compliance' and combating 'tax evaders and avoiders'.
The subject of 'tax cheats' is a buzzword nearing every budget day. In fact, the increase of GCT to 21.5 per cent on imported goods, the minimum business tax, and the 3 per cent withholding tax on services are all measures aimed at attacking noncompliance.
At budget time, this bandwagon is greased and ready to roll once again.
From all reports, since its few weeks of coming into law, garnishment notices were served against four taxpayers.
To the sceptic, garnishment is likely to be counterproductive, but I am not going to enter further into a debate here. Readers will undoubtedly already have their individual viewpoints on the topic.
But what of it, where there is a repayment or tax refund due to the taxpayer?
Tim, a recently retired golden ager, applied for a tax refund. He later had the worst experience of his tax life. He learnt that instead of being due a refund, he owed the Government hundreds of thousands in taxes.
Now he is besieged and was taken before the court. Actions of this kind wrought upon a senior citizen cannot lead to a greater good. Perhaps it needs St George, the patron Saint of England, the slayer of dragons, to tackle this one.
Most taxpayers do not believe it is possible to get a tax refund and that if they make a claim, the authorities will launch an enquiry taking actions meant to stifle such claims because they take away funds from the public purse.
FRIGHTENED OF TAJ
Taxpayers are often frightened of the contents of the brown envelopes marked with the stamp of Tax Administration Jamaica. I know of a taxpayer who having received a tax refund cheque refused to encash it - she just did not trust the 'Greeks, even bearing gifts'.
Don't get me wrong, there are indeed outright tax evaders who are convinced that self-assessment gives them the freedom to cheat on their taxes.
There are consequences for claiming refunds to which you are not entitled. Like jumping from a high building, you are free to take the fall, but not free to live when you hit the ground.
The problem is that the self-employed do not tend to understand the tax rules, and most taxpayers, like Tim, cannot afford professional advice. They have depended on accountants who themselves are unfamiliar with the technical issues involved.
A client once told me that I cause him to pay too much tax, so he terminated my services.
Tax advisory services are works of art, but we are not graduates from Hogwarts School of Witchcraft and Wizardry. We cannot legally cause someone to pay too much' or 'less' tax; we just do not have that power in crafting the art.
- Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston. firstname.lastname@example.org