Small businesses want breathing space
The perceived inflexibility of Tax Administration Jamaica (TAJ), compounded by the fact that it is out of step with the economic day-to-day operational realities of many small and micro enterprises (SME) is believed to be one of, if not the major reason so many of these businesses remain mired in the informal economy.
Local small business operators say efforts to become compliant and grow their companies in a structured way are thwarted by the State agency, with one small business operator offering a win-win solution to the age-old problem.
For businesses that get behind in filing their tax returns, the system of getting back up to date is too onerous, especially for operations employing as little as two persons who in addition to their daily operations duties, must also attend to administrative issues as well.
After putting in all the hard work to get the business up and running, it is usually when they apply for a grant or loan to take their operations to the next level, that the tax issue comes back to haunt these delinquents.
Paperwork required by the lending agencies, as well as the TAD, can prove to be quite a turn off and deterrent to expansion, Donovan Summers, general manager of Heather Laine Limited, said during a recent Gleaner Editors' Forum at the company's North Street, downtown Kingston, head office.
"When EX-IM Bank gave me the list of things, I said 'thank you very much' and left and never been back. We managed to fight through a few years ago and we got a DBJ (Development Bank of Jamaica) loan; they tend to be a little more flexible. They sit with you, send you back for a piece of paper you don't know where to get, but you go and get it, and you come back and you go on until you get through," he said.
It is not that small business operators do not want to comply but that the demands are so rigid and hard the struggling businesses have no wiggle room and must choose between staying afloat and meeting their payroll bills and operational costs.
Meeting the requirements for getting a tax compliance certificate (TCC) is one of the toughest hurdles, the businessman pointed out.
"To get a TCC you have to be up to date with NHT (National Housing Trust), NIS (National Insurance Scheme), Education Tax, The PAYE (pay as you earn), the corporate tax, etc. For a lot of people who want to be up to date, they really want to get on board; it's a big issue if you are a year or two behind, and many people are filing at six years behind," he said.
He added: "When you go down there and say, 'boy, we can get some assistance you know but we need a little', they say, 'yea, yea, come, TAD will help, we have a little help desk but you have to pay up this thing'. Can you imagine, for a lot of small businesses struggling to pay this year's rent and this year's light bill, to pay taxes for the last five years and God forbid you hadn't filed, and they know you are around for the last seven years, all of these things, you around, it's onerous."
Struggling businesses like his are not looking for a tax write off, according to Summers. What they really need is a little breathing space that would allow them to stay in business while giving Government its due.
He offered this solution as a way forward, urging the State to be more pragmatic in its approach.
"They should say, 'look, you owe us seven years but as a small business we see no chance of collecting, but guess what, we can't write it off, we can't walk away from it. Other people have been paying and you have an obligation to the State. We going to give you a TCC today (and) we going to say for every year that you stay current and the Jamaica Business Development Corporation (JBDC) gonna monitor you and we gonna attach you an accountant - you can't do it alone so we gonna put it in a shoebox give you everything'," Summers said.
He added: "'Every year that you stay current we will write off one year in the back. So in 2016, we write off 2009, in 2017 we write off 2010 and so on. What happens is that in seven years you owe nothing and in seven years you have paid seven years taxes, compared to where we are now. In seven years from now we would have paid nothing, neither for the last seven years nor the next seven years'."
"I love it ... an innovative approach to overcoming the barriers," was the spontaneous response of Valerie Veira, chief executive officer of the JBDC.
Janine Taylor, manager of Things Jamaica, was equally impressed with the idea, offering her take on fine-tuning the approach.
"The traditional approaches have not worked, so we take each situation, each scenario, and dissect it and decide on innovative approaches now to overcome it because at the end of the day we are striving to move forward. We don't want to be stuck in the old conversation so that's an innovative way to deal with the tax issue. There are several others and we have tried and some have failed, some have been successful, some require more input and collaboration but at the end of the day it's looking at innovative strategies to overcome the barriers, rather than being stuck where we are now."
Harold Miller, deputy chief executive officer at the JBDC, was enthusiastic in endorsing Summers' innovative approach pointing out that his organisation had been looking along these lines to address that niggling long-standing issue.
"I think it's brilliant for several reasons and we are recruiting a cadre of freelance accountants and other financial experts and legal experts as well, to work in that kind of hand-holding way. One of the things that this Financial Services Unit will be mandated to do is provide financial hand holding for small businesses. It's not because they don't want to pay," he declared.