The Tax Collection (Miscellaneous Provisions) Act after the purging
Shena Stubbs-Gibson, Contributor
Amid bellows of protest, the Government has relented on aspects of the Tax Collection (Miscellaneous Provisions) Act. By and large, however, the amendments conceded by the Government do not monumentally change the most controversial aspects of the Act.
For instance, the garnishment procedure set out in section 40B of the Act remains unchanged, and if all goes as planned, come October 1, 2014, the commissioner general will be able to commence garnishing monies coming to a tax debtor, in the hands of a third party, without the need for any prior court process. Currently, the law does allow the tax authorities to distrain (or seize) monies, among various other assets, of a tax debtor. However, this relates to monies already in the possession of the tax debtor. What is novel about the introduction of this garnishment process is that it allows the monies coming to the tax debtor to be attached (seized) before it comes into the hands of the tax debtor, while it is yet in the hands of another; and further, it allows for this to happen without any prior court process.
Although section 40B subsection 4 was amended, the major issue with that section was missed. The section still provides that upon failure to comply with a request from the commissioner general to pay monies arising to a tax debtor, the person who received the request will be personally liable to pay the sum(s) requested. This, in my estimation, is an important oversight, as the section should have excluded from liability those bona fide cases where the commissioner general is satisfied that the reason for failing to comply with the request arose from the person receiving the request not being, or no longer being legally obliged to pay any monies to the tax debtor.
I will use one of several possible scenarios to illustrate my point: a company receives a request from the commissioner general to garnish three months of salaries of an employee; however, the employee leaves at the end of month 1 and, therefore, is not entitled to salaries for months two 2 and 3. Based on the old, as well as the new wording of section 40B subsection 4, there is no scope for the commissioner general in this scenario to rescind the request issued.
To essentially say that any person who receives a request must comply or be personally liable, no matter the reason for non-compliance, is unjust. This section should be broadened to provide for the revocation or modification of an issued request where compelling evidence is provided to the satisfaction of the commissioner general that the person receiving the request, in fact, has no monies falling to the tax debtor, or not enough to cover the sum requested.
The original version of the Act that had passed in the Lower House had granted the commissioner general the right to register a certificate speaking to the tax owed by a tax debtor, in the Supreme Court. From there, the registered certificate could then be recorded with the necessary agency (for eg the Office of Titles), and in so doing, a charge or lien would be attached to the relevant assets of the tax debtor. There was much opposition to this section because it, too, bypassed the usual court process. The Senate, therefore, resiled and amended the offending section.
The new wording of section 40C requires the commissioner general to make an application to a judge of the Supreme Court before a certificate can be registered. Now all the commissioner general will have to do is to file an application to have a certificate registered in the Supreme Court, which will then be heard by a judge, whose primary objective will surely be to ensure that the debtor had indeed acknowledged the debt. No summons will have to be issued, and no lengthy contentious court proceedings undertaken.
Application of payments
The section of the Act speaking to the application of payments received from or on behalf of the tax debtor has been amended so that payments will no longer be applied first to interest, second to penalties, third to surcharge, and lastly to principal; but rather, first to principal, second to interest, third to penalties, and lastly to surcharges. This is a just and meritorious change.
Further yielding to public/opposition outcry is demonstrated in the deletion of the word 'suspects' in section 40B, and replacement with the words 'has reasonable cause to believe'. The original version of the Act, which had passed in the Lower House, had stated that where the commissioner general knows or 'suspects' that a person controls or has custody of monies belonging to a tax debtor ... then the commissioner general may require that person to turn over the said monies to the tax authorities to settle the tax debt. The new amendment puts the bar higher in terms of when the commissioner general will be able to issue a request. Suspicion will not be enough, the commissioner general must know or have reasonable cause to believe that a third party has, or will soon have monies for a tax debtor before a request can be issued.
While the changes to the Act may not have been as monumental as they could have been had the Government been inclined to be truly magnanimous, they are, nevertheless, material. Indeed, the introduction of the Act by the Government is a smart move, as it should greatly enhance tax compliance and enforcement without a concomitant increase in administrative costs.
The Lower House will now have to approve the proposals of the Senate. However, we know that that is, for all intents and purposes, a fait acompli, given the Government's majority in the Lower House.
Shena Stubbs-Gibson is an attorney-at-lawand legal commentator.Send feedback to:Email: firstname.lastname@example.orgTwitter: @shenapat.