Tue | Sep 18, 2018

IMF paper details challenges of using tax audits to boost compliance

Published:Wednesday | April 5, 2017 | 9:09 AM

A paper released by the International Monetary Fund (IMF) yesterday has noted that tax audits in the Caribbean region, including Jamaica, have had very limited impact in boosting tax compliance.

Jamaica is among countries with high levels of tax non-compliance but the IMF paper says the audits typically used to identify delinquent tax payers have had low productivity in relation to additional revenue yields.

IN PHOTO: Taxpayers in the King Street Tax Office

The paper titled, “Tax Administration Reforms in the Caribbean Challenges, Achievements, and Next Steps”, says audit quality is also an area of concern.

It notes that a significant proportion of audit assessments are disputed and discharged.

For example, in Jamaica and Trinidad and Tobago, audit assessment objections are at 70 to 90 percent rates.

The paper says this is due to the fact that in disputes that legally defer the collection process, taxpayers often use objections as delaying tactic.

The IMF paper also reveals that in the region, the value of accumulated tax arrears compared to the total tax collected is generally high by international standards, reflecting low collection enforcement capacity.

In Jamaica, the stock of tax arrears exceeds the total annual revenue collection at 131 per cent.

And the paper notes that the stock of arrears consists of a high proportion of aging debts and uncollectible debts.

It further notes that in countries where the stock of arrears exceeds the annual collection, a limited percentage is ultimately collectible.

The IMF paper says this is because of various reasons including that collection enforcement may not be seen as a strategic priority, or it does not receive the political support it deserves.