Millions lost in concession abuse
• Public sector workers, political parties find ‘creative means’ to sell vehicle perk • The corrupt practice is widescale, insiders say
While government gave up almost $9 billion in revenues over the last four fiscal years through motor vehicle duty concessions for public sector workers, widescale corruption and abuse have reportedly allowed some to use the fringe benefit to line...
While government gave up almost $9 billion in revenues over the last four fiscal years through motor vehicle duty concessions for public sector workers, widescale corruption and abuse have reportedly allowed some to use the fringe benefit to line their pockets.
Insiders painted a picture of how various categories of workers across government ministries, departments and agencies have used “creative means” to cash in on weak monitoring and enforcement of the guardrails for the perk.
It is an “open secret”, said one executive in the used-car industry, that for years, workers across the public sector have been “selling” their 20 per cent motor vehicle duty concession to ineligible individuals for a share of the savings derived from the use of the fringe benefit.
The concession holder could pocket millions of dollars depending on the make or value of the vehicle involved.
The auto industry executive used a hypothetical situation to illustrate an actual case to The Sunday Gleaner.
“So, let’s say I have the concession and someone wanted to import a 2024 vehicle valued at $20 million, they would save about $4 million by using the concession because I would say ‘give me $2 million and you can use my concession’. They would still end up saving $2 million and the vehicle would remain in my name,” he explained.
The public sector motor vehicle duty concession regime also provides a cash windfall for workers such as entry-level managers, who, based on their salaries, cannot afford to purchase a motor vehicle, the auto industry executive and one trade unionist explained, both wishing to remain anonymous.
“So, rather than lose it, they sell it. There are people out there who are willing to purchase it,” the executive said.
“Back in the day when salaries were extra low, sometimes that money would be equal to their annual salary. And the individual, who would not be used to seeing so much money one time, would accept it,” said the trade unionist.
BREACH OF THE CUSTOMS ACT
The 20 per cent motor vehicle duty concession is a benefit enjoyed by certain categories of employees in the government service and is obtained via an application to the Ministry of Finance.
The application is processed and approved by the ministry’s tax relief unit.
‘Sale’ of the concession is a breach of the Customs Act, which stipulates that the person to whom it is granted “shall exercise continuous control” over the motor vehicle for a minimum of three years after importation.
The law also mandates that where the holder of a concession is separated from the public service – voluntarily or involuntarily – within three years after using it to import or purchase a vehicle, the full customs duties that were remitted “will become payable”.
However, according to the Ministry of Finance and The Public Service, the sale of the duty concession is one of the top two violations of the regime which they have detected. Employees leaving the government service within three years of getting the perk is the other main violation of the system.
‘IT BECAME A TOOL OF FUNDRAISING’
Politicians, including members of parliament (MPs), and the country’s two main political parties have also cashed in on the abuse, a senior government insider disclosed, citing a law enforcement investigation that was triggered because of it.
The insider did not want to be named because they were not authorised to publicly discuss the probe.
For at least three general elections prior to the 2020 parliamentary polls, all candidates for the Jamaica Labour Party (JLP) and the People’s National Party (PNP) were each allotted one duty concession to import or purchase a vehicle to assist with their campaigns, the source revealed.
The secretariats of both parties were also each allocated 20 per cent duty concession for five vehicles for the same purpose, which meant that in total, the perk was applied to approximately 500 vehicles across the three elections.
“Candidates in both parties used creative means to use it to get funding for their campaign,” said the insider, alluding to how the concessions were “traded” to party financiers.
One MP confirmed the practice.
“It became a tool of fundraising. If you examine it, you will find that people on both sides abused it,” the lawmaker acknowledged.
“What would happen, to be frank, is that people would say to somebody, ‘I will, in essence, sell you the concession, but the vehicle has to remain in my name’ and the person would make a donation to the candidate,” the MP explained.
CURRENT PUBLIC CASES
Recently, Jamaica’s anti-corruption watchdog, the Integrity Commission, ruled that criminal charges be filed against PNP St Ann Councillor Lambert Weir and former Speaker of the Jamaican Parliament, the JLP’s Marisa Dalrymple-Philibert, related to the use of their motor vehicle concession.
Both are accused of failing to include motor vehicles purchased with the concession – a Toyota Prado SUV (Weir) and a Mercedes-Benz GLA 250 (Dalrymple-Philibert) – in their mandatory statutory declarations to the commission. They are also cited for breaches of the Customs Act as well as the special provisions attached to the perk.
The commission, in a special report tabled in Parliament on September 19, concluded that consideration should be given to whether the concession granted to Dalrymple-Philibert was “fraudulently obtained”.
It also recommended that the Jamaica Customs Agency take steps to recover the duties that were remitted and determine whether a fine should be imposed on the former House Speaker.
There was no indication, up to late yesterday, whether any criminal charges had been filed in court against Dalrymple-Philibert, who resigned as MP for Trelawny Southern and House Speaker two days after the report was tabled.
The charges and a court date would be communicated via summons, but when contacted, her attorney Peter Champagnie, KC, said the former House Speaker has not yet been served.
“She will make herself available for service [of the summons] as soon as there is notification,” Champagnie told The Sunday Gleaner.
In the report submitted to Parliament in May this year, the Integrity Commission’s director of investigations, Kevon Stephenson, concluded that Weir and close friend Lyson Charlton fraudulently obtained a 20 per cent duty concession, which was used to purchase a Toyota Prado in 2017.
The Claremont division councillor explained, during an interview with The Sunday Gleaner, that the vehicle was not included in his statutory declaration at the time because it was co-owned with Charlton.
GOVERNMENT TAKING STEPS TO RECOVER FUNDS
The Government gave up a total of $2.5 billion in general consumption and special consumption taxes in the last fiscal year because of the 20 per cent public sector motor vehicle duty concession regime, the finance ministry disclosed on September 21, citing data from the Jamaica Customs Agency (JCA).
The total value of the concessions for each of the three preceding fiscal years was $1.8 billion, $1.98 billion and $2.46 billion, respectively.
Between 2018 and this year, the JCA has taken steps to recover approximately $83 million in duties remitted to public servants who breached the terms of the concession, Finance Minister Dr Nigel Clarke disclosed on Friday.
Approximately $27 million has already been recovered, while $33 million represents amounts on approved payment plans.
“The remaining $23 million largely represents non-compliant concession beneficiaries,” Clarke told The Sunday Gleaner.
He said the JCA, in collaboration with Tax Administration Jamaica, has blocked non-compliant beneficiaries in the tax authority’s database, preventing them from disposing of the vehicles in question.
Further, the finance minister said the JCA has commenced legal proceedings against individuals who have breached the terms of the concessions and have stopped cooperating with customs authorities.
MISSED RED FLAGS
The used-car executive laughed when enforcement of the law and the regulations governing the concession came up during an interview with The Sunday Gleaner.
“They really don’t monitor these things; it could never be because I do believe that it is quite common,” said the executive, pointing to some of the missed red flags that would have alerted officials to breaches of the regime.
One example, he said, was the failure to conduct routine inspection of vehicles purchased with the concession and the related documents.
The finance minister explained that the system to monitor compliance with the public sector motor vehicle duty concession regime “relies heavily” on the human resource departments across ministries, departments and agencies.
Following approval of a duty concession, the human resource department at the entity where the application is made is notified via a copy of the exemption notice produced by the JCA, Clarke explained.
As a result, he said breaches of the provisions governing the regime must be brought to the attention of the finance ministry so that they can be forwarded to the JCA to recover the duties that were remitted.
“It is the HR department that ought to be aware whether the beneficiary has exited the public service prior to the stipulated period of three years after receiving the concession benefit,” he insisted.
Last year, Clarke faced angry pushback from unions representing public sector workers after he announced plans to abolish the duty concession as part of the Government’s compensation restructuring exercise. Among the reasons the minister outlined for the move was the abuse of the system.
It is unclear whether the abolition of the perk remains on the table.
O’Neil Grant, immediate past president of the Jamaica Civil Service Association – the union that represents the largest chunk of public sector workers – said during his 12-year tenure, he never had a case involving a member being accused of violating the concession regime.
He believes a majority of public servants comply with the provision of the motor vehicle duty concession regime.