EDITORIAL - Changing tax rules midstream
But for his wish to complete and implement portions of his tax-reform programme, Finance Minister Peter Phillips would, around this time, be presenting the government's budget for the 2012-20013 fiscal year. He will now do that in the middle of May.
Hopefully, it is the last time that a Jamaican finance minister will deliver, and cause to be debated, a national budget after the completion of the first quarter of the calendar year.
The Jamaican government's fiscal year from April 1 to March 31 is a hold over from our British colonial tradition. But it is a legacy that is not, for the general conduct of commerce, particularly efficacious.
The fact is that the accounting year for the vast majority of businesses in Jamaica, and we dare say most other places, runs from January 1 and December 31. Firms, like most of the rest of the society, follow the Gregorian calendar year that has been in use in Britain and most of its former colonies since 1752. Their management systems are configured in tandem with the logic of the calendar.
Then they have to deal with the government!
For instance, Dr Phillips, as often the case with finance ministers, will very likely announce some new tax policy to come into force halfway through a firm's financial year and, therefore, the period over which its tax liability is assessed.
But that, for the majority of companies, is not synchronised with the government's fiscal year. It will cost firms time, translating to expensive man-hours, and much distraction from their core operations, to become compliant. There may be additional costs for the adjustment, or purchase of accounting and/or management software.
The shame is that this irrationality is a constant.
A simple, efficient solution is for government to synchronise its fiscal year with the calendar year and, therefore, with the financial year of the majority of businesses. Or, it might have all new tax policies begin with the calendar year, without retroactivity, so as to end this unfair burden being placed on, and messed made of, the accounts of businesses.
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