Mon | May 22, 2017

Withhold that tax

Published:Sunday | June 7, 2015 | 6:00 AMGordon Robinson, Contributor

Last Tuesday, my column ('Bloodsuckers') highlighted the latest example of taxpayer sacrifice on the altar of revenue cash flow, namely the 'new' 3% 'withholding tax'.

Like any good lawyer, using 700 words where 70 would do, I eventually got around to making the point that the tax was unworkable, impractical and mean-spirited. It seems I was prescient. Unbeknown to me, on May 14, the following letter had been written by the PSOJ to TAJ Commissioner General Ainsley Powell:

"RE: 396 WHT ON SPECIFIED SERVICES

With respect to the subject matter above, we write to express our concerns and make recommendations as to amendments that should be made in order to facilitate a suitable business environment, while at the same time achieve your objectives for tax compliance.

We are very aware that the objective of TAJ is to improve tax compliance, and more precisely widen the tax net. We are also on record as saying that we support this initiative, as we believe that everyone must pay their fair share of tax.

The problem we have with this legislation is that it adds more complications to already compliant taxpayers, and should specifically target those persons who are not in the net, and not classify compliant with non-compliant taxpayers. So as it stands, the current legislation may catch some of the persons who are non-compliant but still may not address all persons who deal specifically with cash transactions.

The following are some of the impacts we see:

1. Negative cash-flow impact, especially on legitimate businesses, which could have the effect of:

(a) negatively affecting transactions;

(b) increasing prices; or

(c) negatively impacting wages, if not employment.

Three percent cash flow is significant especially for businesses already having challenges, or where they are not collecting receivables when due. This includes the concerns of understanding what services and what it applies to. For example, is the GCT or principal component in a lease payment applicable?

2. Potential to significantly increase the administration cost and burden of companies, who now will act as tax collectors.

3. Placing the WHT requirement on so many transactions will cause TAJ to lose some of the focus on those who are non-compliant.

The first two points were also made in the newsletters sent out by KPMG and PricewaterhouseCoopers. Our recommendation is that if the focus is on non-compliant persons, the best way to do this is to require the WHT be placed on entities and individuals that are not registered as companies under the Companies Act or those businesses that are not registered partnerships or businesses under the Registration of Business Names Act ('registered entities'}. This would reduce the number of transactions for TAJ to focus on and you could also easily see who isn't filing taxes by looking at those individuals and entities that aren't registered entities. This would also encourage persons and entities to become registered entities, thereby becoming formal, if they want to avoid the WHT.

We are aware that the TAJ has delayed the implementation generally, which we appreciate. Consequently, whatever decision is taken, it would be necessary for an adequate lead time to be given so that it can be properly incorporated in the internal processes.

We ask that you give favourable consideration to our recommendations."

The letter was also signed by the Institute of Chartered Accountants, the Bar Association, the Jamaica Chamber of Commerce and the Jamaica Manufacturers' Association.

 

CRACKING WHIP

 

Proving that democracy works when Big Business wants it to work and cracks the whip, the following finance ministry press release was issued on May 30:

"Implementation of Withholding Tax on Specified Services date postponed The Ministry of Finance and Planning (MOFP) is advising that the implementation of withholding tax on specified services is postponed, until further notice. The minister of finance and planning, Dr the Honourable Peter Phillips, and the commissioner general, Tax Administration Jamaica (TAJ), Mr Ainsley Powell recently met with stakeholders from various private-sector groups and have agreed to delay implementation currently slated for June 1. Further discussions will be held to examine issues raised related to the implementation of the new legislation, particularly for entities that currently do not issue withholding tax certificates. Upon conclusion of the discussions, TAJ will issue a release on any modifications agreed and the revised implementation date. Tax withholding agents are encouraged to use this period to continue configuring their systems in preparation for the new implementation date. The TAJ Technical Specialist Unit is available to provide guidance, as needed."

Well done, PSOJ. A sadistic scheme disguised as one to widen the tax net but, in reality, meant to drain the very life force from those of us already overburdened with taxes, has been avoided for the time being. Let's be frank (not Joe or Chet). This has NOTHING to do with widening the tax net and, as the PSOJ pointed out, will have the opposite effect. Government doesn't engage the services of contractors who aren't tax compliant or properly registered, so how on God's green earth could this process be aimed at non-registered persons or persons otherwise below the taxman's radar? Big corporations, in furtherance of self-preservation, don't accept invoices from persons who can't produce a TRN.

 

BAREFACED BETRAYAL

 

So, what's this? It's a barefaced, bone-headed betrayal of already-battered taxpayers in a drastic, desperate, dastardly stab at improving revenue cash flow in order to meet impossible, IMF-imposed primary surplus targets. It's a trick. We're being hoodwinked, bamboozled and led astray by masters of political illusion who want us to believe they're trying to widen the tax net when all they want to do is suck our blood as early and often as they possibly can until we have nothing left. This latest imposition of cruel and unusual tax punishment on hard-working citizens must be exposed for what it really is and resisted at all costs.

The PSOJ's logical lobby has thwarted Government's plan to raid our legitimate earnings like pickpockets at a convention for the visually impaired. Now we must support the PSOJ with one concerted voice. We must prevent Government from yet again running amok in a mass assault on our livelihoods (getting less and less lively as Government-induced stress levels rise) like Phillip Paulwell with EWI and Tony Hylton's wild Crown and Anchor gamble threatened to do to our national assets.

Just as the PSOJ's petition earned us a postponement, now we must petition, by all lawful means of protest, for the new implementation date of this wicked withholding tax to be the 12th of Never.

Peace and love.

n Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.