Tue | Jan 21, 2020

$230b tax write-off list tentative for September

Published:Wednesday | June 4, 2014 | 12:00 AM
The tax audit centre in Kingston. fILE

Avia Collinder, Business Reporter

Tax Administration Jamaica (TAJ) is moving ahead with its accelerated review of outstanding tax liabilities as the Government prepares to write off approximately $230 billion in old, uncollectible tax arrears.

The agency has set September as a tentative deadline for wrapping up its due diligence tax debt and to make its recommendation to the minister of finance, according to TAJ head of communications Meris Haughton.

The Government is planning the one-time write off as recommended under the fiscal policy measures intended to clean up the tax department's books and to better focus on collectible arrears.

"This is done in other jurisdictions. It makes no sense keeping an amount which is uncollectible, which is not real," Haughton said.

The legislation enacted last year to facilitate the write-offs had as one of its justifications that the revenue authorities continued to devise special projects or create special teams to manage the arrears, which ended up costing more than they collected.

Broadly, TAJ will write off outstanding taxes owed by private-sector companies owed before December 2010, but the process won't be automatic.

"Based on circumstances, a few of these liabilities may not be written off on this basis, as in where liabilities are under assessment in court or are under appeal, or a refund set-off is pending, etc," Haughton said.

She said businesses with arrears slated for write off might still be in operation, but may qualify for debt forgiveness based on set criteria in the regulations, having been assesses as having no ability to pay.

The write-offs will also cover taxpayers who cannot be found, and in circumstances where the debt has been outstanding for over ten years and "there is no reasonable possibility of it being collected, or evidence of the debt has been destroyed," said Haughton

However, any individual or company with a surplus of assets over liabilities or with income in excess of expenditure is unlikely to have their debt discharged.

Automatic write-offs may also be possible for debts predating December 2012 for public bodies - that is, education tax and income tax to be paid to Consolidated Fund.

It will be up to the commissioner general to determine whether any debt is uncollectible in accordance with the criteria set by law, that is, "all reasonable collection action has been taken and all possible means of collection have been exhausted, there is no possibility at any time in the foreseeable future of collection through set-off and the commission generally is satisfied that, in the case of an individual taxpayer, the individual is unable to pay the debt, based on ... circumstances, income, expenditure, assets and liabilities ."

Ongoing due diligence

Assessment of the corporate taxpayer's ability to pay will be based on its income, expenditure, assets and liabilities, as well as the income, expenditure, assets and liabilities of the individual who controls the entity.

For the taxpayer who is deceased, the write-off will be made where the taxpayer has no known assets or estate.

For an un-discharged bankrupt without assets, the tax agency will rely on the word of the trustee as to whether payment to the Government was possible.

The ongoing due diligence, Haughton said, will make note of efforts which have been made to collect in the past.

TAJ may require statutory declarations of income and expenditure, assets and liabilities of individuals and companies being assessed for debt forgiveness.

However, the process will not accommodate applications for debt to be written off.

Haughton described the process as akin to a business entity that removes uncollected bad debts from its records to provide better financial information regarding the status of the organisation.

"Removing these arrears from our records will provide better information for planning purposes and expectations, re possible revenue from arrears collection."

The Tax Collection Amend-ment Act 2013, under which the write-off is being accommodated, also provides for a tax debt-arrears management system, the ranking of the debt for the purpose of collectability, and sets the criteria for determining a debt to be uncollected.

As at December 2011, there were 70,245 accounts totalling over $230 billion in old tax debts.

Of this $230 billion, approximately $195 billion was then over three years old, and only approximately $4 billion was less than six months old, with the remaining amounts between six months and three years, according to data presented in Parliament last year.

The estimate of $230 billion has not been updated, said Haughton.

The recommendations for write-offs, once approved by the finance minister, will be gazetted. It will name all affected companies and entities.

"The collector general will sign off, the minister will approve and it will be gazetted," she said.