Wed | Aug 23, 2017

Peter Townsend: Oppression at Stamp Office

Published:Sunday | April 24, 2016 | 4:00 AM
Peter Townsend
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This is an open letter to Prime Minister Andrew Holness:

I want to bring to your attention the appalling level of oppression being imposed upon the citizenry by the Jamaican Government through the Stamp Office of Tax Administration Jamaica (i.e., the arm of Government that collects transfer taxes and stamp duties).

Government earns billions of dollars in revenue from land transactions through the Stamp Office. This leg of the process typically begins with the agreement for sale being submitted by the vendor for 'assessment' of tax liability. Upon receiving the information regarding the amount of tax liability, the vendor has a limited window of 30 days in which to pay the taxes (which can be hundreds of thousands of dollars, or even millions of dollars). Failure to pay within that stipulated time attracts the severe penalty of 100% (Yes! Double the calculated tax liability).

To add insult to injury, the Stamp Office can hold up the assessment process (whether because of staff limitations or otherwise) and can take weeks to give an assessment of tax liability, particularly if it decides to send an assessor to visit the property being sold to do an appraisal of what they think the value of the property should be. This, I suppose, is if they suspect that the property in question is being sold for a price which the Government considers to be below the market value.

 

BURDENSOME RIGMAROLE

This rigmarole, which is driven by the Government's desire to extract more money from the vendor and purchaser, slows down the wheels of commerce drastically and the resultant delays may result in hardship to the parties in the transaction: e.g., (a) for a seller who badly needs the funds to pay for life-saving/emergency medical care or to settle burdensome debts; (b) for a purchaser urgently in need of housing; and (c) for the Government, which needs the revenues to be paid into its coffers sooner than later.

The fact that an asset is worth, e.g., $10 million, does not mean that the owner can get that price quickly enough in order to meet his or her urgent needs, and so a discounted price may be in order.

There should be a system that operates on the basis of strict, objective principles rather than on subjectivity and expedience. Hence, if Government's revenues are calculated based on the transaction price, rather than on the perceived/paper value (which may not be realisable at that particular point in time), there would be no need to carry out lengthy assessment processes. The taxpayers could easily calculate their taxes and pay over same to the Stamp Office accordingly.

Imposing a late penalty, of such a high percentage on a transaction which Government had not previously anticipated also raises questions as to (a) what mischief is being cured and (b) the reasonableness of the Government.

A government is an elected body, by the people for the people, in a democracy, which Jamaica is. The purpose of government in a democracy is to take care of its citizens.

Accordingly, the citizens need well-maintained public roads, schools, hospitals, postal services, laws to protect against environmental disasters (whether man-made or by act of God), laws to protect us from crime (whether blue-collar or otherwise), and by no means is this list exhaustive. In order to accomplish this, the Government levies taxes on its citizenry so that it is able to pay for all these services.

What Government shouldn't do is to get involved in commerce in such an intimate manner so as to price-fix a transaction between two willing parties in its citizenry. Commerce should be dynamic, free-flowing, and unobstructed.

If one party to a transaction feels he has been defrauded, he seeks remedy through the courts.

The marketplace comprises a willing seller and a willing buyer. The market price of a good or service is determined by what a willing buyer is prepared to pay a willing seller for that good or service. Some factors can affect the price, such as supply and demand. If the supply is too much, a glut on the market will give the buyer an array of choices that can dictate his behaviour (and so he may not be willing to pay as much for that good or service).

Additionally, other factors such as the health of the seller or buyer may affect prices. The seller may think he has a valuable piece of real estate, for example, but because he is dying of terminal cancer, he may want to unload that piece of real estate in order to access funds quickly for his immediate medical care. He may then choose to sell that piece of real estate at a discounted price.

What impact then should government have on the aforementioned real-estate transaction?

 

KEEP OUT OF PRICING

We know that it is the Government's business to collect taxes to take care of its citizenry. So Government will impose a transfer tax on the real-estate transaction. What Government should do is to collect the taxes based on a transaction amount (as clearly defined by a contract between the two willing parties). Government should not insert itself into the intimate details of the transaction so as to

now determine if the contract price is fair.

These are two willing parties that have executed a binding contract between themselves. Each party has his personal extenuating circumstance that may have led to the agreeable details in that said contract. It is not the Government's business to get so intimately involved so as to try to determine whether or not the details negotiated are fair. This slows commerce and leads to price fixing by the Government (and in the private domain, price fixing is illegal, so why should it be legal in the public domain?).

If Government so chooses to get involved in each intimate details of a real-estate transaction, the Government has to hire more personnel to assess each transaction. This will lead to higher taxes because Government will have to raise more taxes to pay the salaries of the increased personnel.

Additionally, Government may put undue burden on the parties to the transaction by slowing down the process (the time taken for its personnel to vet the details of each transaction between two willing parties in its citizenry). There are other more efficient ways that Government can ensure that a transaction is above board.

But even so, it is not the Government's business to get involved in the details of each transaction between willing parties when said transaction is not an issue of public safety, but a mere private exchange of a good and service between two willing parties.

We also know that Government is usually NOT the most efficient, because it is responsible for social welfare and not necessarily efficiency, as is required in the private domain.

For an inefficient bureaucracy to so impact the intimate details of each private (not public) transaction between willing parties in its citizenry defies logic and only seems to perpetuate corruption, unfairness and mismanagement.

Mr PM, I am sure that you want Jamaica to join the First World and not continue with this archaic practice which results in the unnecessary oppression of our people and stymies growth and prosperity.

I beseech you to make the appropriate changes to the policies governing operations at the Stamp Office to end the unfair and inefficient foregoing practice.

- Peter Townsend is president of the National Democratic Movement. Email feedback to columns@gleanerjm.com and petertown1@yahoo.com.