Ethlyn Norton-Coke, Guest Writer

NORTON-COKE

The income tax threshold, or income taxable at the 'nil' rate, remains at $193,440 per annum, ($16,120 per month; $3,720 per week) until further notice, as there has been no increase in the threshold to date.

The increase was expected to be to $275,000 per annum as of January 1, 2007. However, the legisla-tion is yet to be put in place. It has been indicated that certain existing tax-free allowances will have to be brought into the tax base in order to partially compensate for the revenue loss of approximately $4.7 billion estimated to result from the upward threshold movement.

It is also understood that the simplification of the Pay As You Earn system (PAYE) and statutory deductions to facilitate easier reporting and enhancing compliance is also to be considered.

The Minister of Finance is expected to announce a task force to make recommendations to him in respect of these matters.

COMPLIANCE UPDATE

Taxpayers are reminded that the final income tax return for year of assessment 2006 and any tax due as indicated in the return are due for filing and payment on or before March 15, 2007.

In addition, the Declaration of Estimated Tax and Income (Estimated Tax Return) for 2007 is due for filing on the same date, as well as the first quarterly instalment of estimated tax (if any).

Failure to file these returns on time can result in estimated assessments by the revenue department with penalties, related interest on overdue tax, and legal action for failure to file the relevant and appropriate tax returns.

To avoid any such action, even if the accounts are not ready and there is likely to be a tax liability, payments 'on account' should be made to avoid any interest on overdue tax.

Extensions of time in which to file returns will not be granted except in extenuating circumstances and any such application must be made to the Commissioner of Inland Revenue and not to the Commissioner, Taxpayer Audit and Assessment.

INCREASED COLLECTION DRIVE

No new taxes have been announced but the budget deficit is expected to be reduced by an increase in tax collection in the future instead of through borrowings/loans. This means that the existing drive by the Inland Revenue Department to collect arrears of taxes of all types (corporate, PAYE, education tax and General Consumption Tax) will be accelerated.

The Inland Revenue Department, approximately nine months ago, launched a programme for voluntary compliance, inviting all taxpayers with arrears to approach the department's Compliance Division to make arrangements to pay on a monthly basis.

In addition, any amount that can be paid as an 'initial down-payment' will be accepted.

This is the department's Collector of Taxes new method of encouraging taxpayers to meet their obligations on a timely basis and in a more customer-friendly environment.

Taxpayers in arrears are encouraged to take advantage of this opportunity as the relief from penalties and interest on the overdue tax will be more generous.

GCT AND ICTAS

The General Consumption Tax component of the revenue department's computer system (ICTAS) has been re-programmed to allocate payments to the period indicated in the returns by the taxpayer even if the taxpayer is in arrears.

Previously, if a taxpayer were in arrears, any payment would be allocated first to the liabilities in arrears and any balance to the periods indicated in the return.

The effect of this will be that the number of penalties imposed will be reduced, but the interest on GCT that remains unpaid will increase as they will be in existence on the revenue's system/books for a longer period.

The importance of filing GCT returns on time - that is amounts in respect of the previous month (for example December 2006 returns) which are to be paid by the end of the following month (January 31, 2007) - cannot be overemphasized.

Taxpayers are reminded that for returns that should be filed together with payments, the payment should be made, as filing the return without the payment will result in the generation of a penalty plus interest on the unpaid tax due.

PROPERTY TAX

There is a special drive established by the Inland Revenue Department and a special Property Tax Collection Unit has been established to collect arrears.

In the circumstances, all arrears of property tax should be paid as quickly as possible, and if the amounts due cannot be paid in one payment, arrangements should be made to pay off the arrears in instalments suitable to the taxpayer and the Inland Revenue Department.

For you to remain tax compliance and avoid penalties and interest on any tax and statutory deductions, see a tax calendar for 2007 on Page 17.