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EDITORIAL - Smoke out the tax cheats

Published:Saturday | June 9, 2012 | 12:00 AM

Anyone who understands the number-crunching, head-scratching and strategising that go into crafting a tax package for a national Budget knows that that is the easy part. The hard part is actually ensuring that collection measures up with projections.

And that's the rub.

The rigidity of the Government's $612-billion Budget means that significant shifts in variables, or the cunning of nimble-fingered bookkeepers in businesses, could force a recalibration of the bases on which revenues are predicated, leaving the embarrassment of missed targets.

The grave implication is that tax leakage must be staunched - and fast.

This problem is magnified - as emerged in a Gleaner Editors' Forum on Thursday - in the tobacco industry, where Carreras officials lament estimated tax losses to the Government of $3 billion-$4 billion per year, which, if collected, could help plug the $19.4-billion hole in the Budget.

Of course, patriotism isn't Carreras' only motivation. The cigarette manufacturer's bottom line has been eroded - to the tune of a 40 per cent plunge in sales - by the criminal underworld, which bypasses the tax net by smuggling in millions of dollars worth of contraband cigarettes as well as poor-quality knock-offs.

Self-interest aside, Carreras' concern is Jamaica's concern.

Most of the contraband is shuffled through the country's ports, which points to criminal complicity that goes beyond an attempt to secure a cost advantage over legitimate suppliers.

Authorities should not yield

According to Carreras Managing Director Richard Pandohie, "You find that the same guys are linked to the gun network. People are moving from the hard drugs, where it is clearly a crime, to smuggling things like cigarettes, etc., where it is more considered to be like a soft crime. The penalties are light and most people just turn a blind eye to it."

The metamorphosis of narcotics traffickers into cigarette smugglers signals partial police success in clamping down on the network of illegal guns and drugs, forcing them to extend their tentacles into perceived safe territory. But the authorities must yield no quarter.

That state funds are being siphoned by unscrupulous elements at the Customs Department must weigh heavily on the mind of the new head of the revenue sieve, Major Richard Reese; Jamaica's finance minister, Dr Peter Phillips; as well as the national security minister, Peter Bunting.

Strengthening the security framework at the ports and reinforcing the integrity of oversight systems would, therefore, contribute, in no small part, to a significant boost in the tax intake.

While we reserve comment on the wisdom and viability of the idea, this newspaper urges Dr Phillips to mull over a recommendation by Mr Pandohie that a specific fraction of the tax take at Customs be reinvested in infrastructural and manpower strengthening of the department.

Solving the crisis at Jamaica's Customs Department would be a victory on two fronts: shoring up national security, and a revenue plug. This effort extends well beyond those who smuggle in cigarettes beneath the radar of the authorities. It would also widen the net to capture, as Mr Pandohie contends, a wide range of imports which are misclassified in order to benefit from less tariff, or duty exemptions.

Strong action by the Government in getting Customs up to snuff and tackling cigarette smuggling, and other import breaches, will prevent much-needed tax revenue from going up in smoke - literally.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.