Go after bigwig tax cheats
Trevor Munroe, Guest Columnist
Your editorial, 'Adding bite to the tax growl' (Sunday Gleaner, July 27, 2014), reminded me of my question in the Senate some years ago: "How many persons have been locked up for tax evasion in Jamaica?" The answer came back: None.
Fast-forward to February 15, 2012, to the submission of the Private Sector Working Group on Tax Reform to the Taxation Committee of Parliament. Recommendation 129 states: "Visible imposition of criminal sanctions (including jail time against large tax evaders (i.e., 'making an example'). (pg. 56, Submission from Private Sector Working Group)."
Two-plus years after, still no jail time for large tax evaders. And according to the minister of finance, 27 per cent of large entities with sales of J$1 billion and above don't file, and 21 per cent don't pay corporate-income tax.
What happens to large tax evaders elsewhere?
In the United States (US) for the third quarter, October 2013 to January 2014, the Internal Revenue Services initiated 3,250 investigations, recommended 2,653 prosecutions and gained convictions in 2,348. Seventy-nine per cent of the convicted were sent to prison, serving an average of 41 months each.
What about Canada? On the website of the Canada Revenue Agency, we read one of many cases: "Allan Curle and Bruce Johnson were sentenced on June 2, 2014, in the Ontario Court of Justice in Thunder Bay, to a total of 24 months in jail and a total fine of $305,073. On March 21, 2014, Curle and Johnson, as directors of Norall Group ... , were found guilty, in the same court, of one count each of tax evasion and conspiracy to commit tax evasion.
A year and a half ago, the then director of public prosecutions of the United Kingdom, Keir Starmiere, QC, spoke on prosecuting tax evasion: "The top tax criminals of 2012 - a list of 32 individuals ... taken together are now serving a total of over 150 years' imprisonment .... Tax evasion has to be dealt with robustly all the time. But in a recession, when ordinary law-abiding taxpayers are suffering real hardship, the need to deter, detect and prosecute those who evade tax is greater than ever."
Could there be any disagreement with this urgent need here in Jamaica from the 79 per cent large taxpayers who are compliant and the vast majority of Jamaicans now 'suffering real hardship' under the PAYE and GCT regime.
Perhaps the delinquent large taxpayers are overburdened? Well, take a look at the World Bank Country Economic Memorandum, 'Jamaica: Unlocking Growth' (2011), which states: Among the "largest taxpayers, the collected [corporate income} tax rates were 2 per cent for the telecommunications industry, 5 per cent for the hotel/tourist industry and 9 per cent for construction.(pg 8)... .
"Inconsistent, complex tax policy with numerous exemptions and special privileges has reduced tax revenue by an estimated 20 per cent, significantly reducing the government spending capacity (pg x)."
Twenty per cent of budgeted revenue for 2013-2014 would amount to approximately J$85 billion. Giving up that revenue by any further postponement of serious tax reform, by going only after chicken feed from the small and allowing the 21 per cent large taxpayer evaders' impunity is contributing to a desperate situation where:
Little or no money is available for fixing KPH or Victoria Jubilee, for putting in new water-supply systems, rehabilitating farm roads, buying urgently needed fire brigades, refurbishing courthouses and police stations, financing affordable student loans, etc.
Jamaica continues to borrow to make up the shortfall.
Jamaica is now ranked third in Latin America and the Caribbean in income inequality.
Tax Administration Jamaica (TAJ) said (July 15, 2014 ) that it "will be stepping up enforcement action against delinquent taxpayers and making it public".
This is all well and good, but how many of the delinquent taxpayers whose names are being published are the large tax evaders?
Should not Minister Phillips, perhaps after giving the 21 per cent large taxpayers a reasonable opportunity to become compliant, not publish the names of these entities?
Is this not another reason why Jamaica urgently needs campaign-reform legislation to ensure disclosure of big contributors to parties and reduce the likelihood of delinquent large taxpayers buying impunity through secret campaign donations?
National Integrity Action's (NIA) ad, 'Pay Your Taxes', has raised public awareness, but only when the authorities add "bite to the tax growl" and provide for the jail time now being served by the tax evaders in the US, Canada and the UK will we see the upturn in revenue necessary to reduce borrowing and provide the services for which our people are now in dire need.
Professor Trevor Munroe is executive director, NIA, and visiting honorary professor, Sir Arthur Lewis Institute, UWI, Mona. Email feedback to email@example.com.