Everald Dewar | RAiS, the taxman’s Frankenstein
In the Star Trek: The Next Generation episode titled 'The Big Goodbye', Captain Picard and some of his crew became trapped in a Dick Tracey murder-adventure simulation on the ship's holodeck as a result of a computer malfunction.
The reality of computers gone wild seems to have infected the implementation of the online tax service portal called RAiS the Revenue Administration Information System of Tax Administration Jamaica (TAJ).
There have been complaints of additional tax liabilities contained in demand notices issued under RAiS that are questionable and leave taxpayers feeling they are being asked to pay more taxes than is legally due.
There are several stories going around. In a partnership, the unit of taxation is the partners in the firm and not the partnership itself. But notices are now issued with tax liabilities for partnerships. There are reports that demand notices are issued resulting in an imputed tax rate of over 50 per cent. This can only be classified as hypothetical taxation. Operators of small businesses complained that they received notices for tax liabilities that exceed their sales - a situation described by one operator as extraction of the widow's mite from suffering businesses.
Aggressive revenue collection efforts
The deputy commissioner general of TAJ is on record reporting that their revenue collection efforts are 'bearing fruit'; that several suited programmes were developed using "automated risk models as well as third-party data" and from which the expected intake is $4 billion. He cautioned that "tax evaders will be aggressively pursued through intelligence and enforcement actions and brought to book".
It would seem that RAiS is creating a tax windfall through demand notices, spiced up with interest and penalties. A similar situation occurred back in 2007 after the launch of the Integrated Computerised Tax Administration System - ICTAS - which issued payment reminders by the scores. On recognition that most of these had errors, the notices were rescinded.
We have no hope that this will take place in the current dispensation, in light of the mandate announced by the deputy commissioner.
Pope John Paul II pronounced sometime ago that one of the sins of the modern world is a failure to pay tax. He was reported as saying: "It is unjust not to pay the social contributions demanded by legitimate authority". However, one is cautioned not to openly criticise the authorities for some of the methods adopted, such as the use of scare tactics by demanding taxes that are not properly due.
It is no secret that taxpayers, in a bid not to get into a fight and invite an unwelcome audit, will just pay the amounts demanded by the tax authorities. So it would be fair to say that questionable conduct is not only the sole prerogative of the taxpayer - the authorities are also capable of it.
The Tax Collection Act provides that proceedings for the recovery of tax may be instituted at any time, until the tax is paid. This process usually starts with some kind of communication between the TAJ and the taxpayer long before a demand notice is issued. For instance, the commissioner general would not exercise his powers to raise assessments or make adjustments until after the expiration of the time allowed for the taxpayer to deliver his return or explain any discrepancy.
Further, any notices of assessment that lack particulars or proper explanations need not be issued. For instance, it is common courtesy to first communicate with the taxpayer where there appears to be errors or discrepancies on his or her tax return.
Happily, in my experience, sanity prevails in instances where one makes contact with TAJ concerning these notices for them to be righted. Unsatisfied taxpayers, too, have justifiably placed the blame on 'the system', as RAiS goes through its teething pains.
However, the commissioner general, in applying the law does have discretion of care and management within his powers. He should not allow a machine to have its way and to run amok.
In the gothic thriller Frankenstein, there is a caution about the dangers of science and technology. It tells the story of Victor Frankenstein's obsession with science, which he used to create a monster that turned around and attempted to destroy its maker.
- Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston.