Sabrina N. Gordon, Business Reporter

The new integrated computerised tax administration system has developed a glitch in its coding system, resulting in the withdrawal of 28,818 income tax payment reminders sent out in error.

The reminders to taxpayers, when totalled, demanded payment of some $5 billion.

The tax authorities acknowledged this week that much of that money related to payments it had already received.

The new system was implemented in April, with the first round of payment reminders sent out on June 23.

Advisory issued

The Financial Gleaner was alerted to the error by an advisory from a top audit firm to its clients offering its services to reconcile their accounts.

The tax notices were subsequently withdrawn, but with a warning to taxpayers who were genuinely in arrears that they would still be penalised if they did not pay.

"The problem has to do with how the parameters were set in the system," said Meris Haughton, director of public relations in the Tax Administration Services Department (TASD).

"The coding was set incorrectly and picked up information that should not have been picked up, but has since been resolved."

The discrepancy came to the attention of the Inland Revenue Department after the office received numerous calls from persons about inaccuracy with their accounts.

Liabilities from 1990s

The payment reminders stated outstanding tax liabilities dating back, in some instances, to the early 1990s.

The reminders to companies covered combined arrears of $3.6 billion, and $1.4 billion for individuals.

In its 'Tax Newsflash' of August 17, KPMG said its review of a sample of the reminder indicated that the IRD system might have 'certain operational issues', resulting, it said, in "some payments, particularly in sub-accounts, not being consolidated to a taxpayer's main account."

KPMG, like the TASD, warned that withdrawal of the notices does not constitute a waiver of legitimate tax liabilities.

"While the reminders have been withdrawn, the liability is still on record and persons who have received the notice but have not made contact with the office are encouraged to do so," said Haughton.

It is to the benefit of both the taxpayers and the authority to make sure that payments made were correctly recorded, she said.

Statements available

The TASD said it was willing to make available, on request, statements of accounts to persons so that they can reconcile their accounts.

Persons who have received refunds were also picked up in the computer-generated notices.

"These were about 200 persons and were dealt with immediately," said Haughton.

Citing the example of banks, she said that some companies may have filed their income tax using branch accounts instead of the main company account, which the IRD computers tagged erroneously as outstanding.

Five hundred of those classifications were found and have already been corrected, Haughton noted.

Payment reminders were also sent out to persons who were granted waivers as their information was not fed into the system.

A decision was also taken not to mail notices to persons with small amounts - that is, those owing $100 and under - but those too were mailed out.

TASD anticipates that it would have resolved the errors by year-end, and says at that time a new round of reminders and notices will be sent out.

Contact tax office

In the meantime, the tax authority is urging persons who have received the payment reminder to make contact with the office, either through their accountants or personally, to reconcile their accounts.

The automatic computer generation of notices and reminders in respect of income tax is part of the tax authorities efficiency drive, to boost tax compliance and collections.

Reminder notices are mailed out to persons who fail to file their returns or who have outstanding balances.

Outstanding balances for income tax attract penalty interest of 40 per cent per annum.

TASD says the system's parameters have been reset and would continue to issue reminders on a quarterly basis.

sabrina.gordon@gleanerjm.com