By Dennie Quill, ContributorIT'S SOME kind of a cruel joke to hear our Minister of Finance smugly talks about no new taxes in one breath but admits to the likelihood of new user fees in the next. This posturing offers cold comfort to the consumer because whether it is called taxes or user fees the source is the same the consumer's pocket, and they all add to the cost of goods and services.
It is in the interest of every Jamaican that our Government collects all the taxes to which it is entitled. If all working persons were rendering unto Caesar what is Caesar's there would be no need to anticipate each annual Budget with trepidation. I feel that between Income Tax, General Consumption Tax (GCT), Transfer Tax and Property tax, there are enough taxes on the books to substantially cut the Budget deficit.
I am convinced that the problem is in the administration to be precise collection. Take GCT , I have concluded that thousands of business are collecting GCT and treating it as their own revenue stream. They put the money collected on behalf of Government into their tills and that is the end of it. Think about how many times you have used a service and the bill comes with GCT added but nowhere on that bill is there a GCT number. I know because I have been going through my monthly expense account and I have been examining my restaurant tabs and I see where I was charged GCT, but nowhere on the receipts could I find any GCT number. That must be a violation of the law. Whenever a businessperson collects GCT and does not hand it over, he is not only cheating the customer but he is robbing the Treasury. It is ironic that some of the restaurants to which I refer are regularly patronised by Government Ministers and top officials I often see them basking in the ambience and stuffing themselves, totally oblivious to what is akin to a hold-up.
CUSTOMS
Another area of substantial revenue leakage is Customs. Hello? It appears that no one on the planet will ever be able to fix Customs. An acquaintance recently related his experience with Customs. He imported a few items for his home. As circumspect as they come, he retained all his bills for the purchases he made at well-recognised department stores, Brandsmart and Home Depot in the United States (U.S.) In all cases, the goods were taken by the suppliers directly to the shippers. They were shipped to Jamaica by a U.S. freight forwarder. He said on presenting his invoices to Customs they were rejected and instead he was asked for the freight forwarder's invoice. He had to return to the U.S. and hand his receipts to the freight forwarder and ask him to prepare an invoice for Customs. To his chagrin the first question he was asked was, "What value should I put on the invoice?" Now the freight forwarder was asking this question with the genuine receipts in one hand. What ridiculous notion could beset the Customs Department to reject invoices from suppliers and insists on an invoice from an entity that sells no goods? Are we turning the law into a trap for honest people and a bonanza for cheats?
My sources tell me that another major revenue leakage derives from the legal mechanism of transfer pricing. For example company X which operates in Jamaica imports raw material for its production. It sets up a subsidiary company in Bermuda or the Virgin Islands and uses that company to buy its raw material at, say, US$10 per unit. The foreign subsidiary then sells the goods to company X at US$15 per unit thereby retaining a US$5 profit. All this may look good to the Jamaican tax authorities for it means they are collecting GCT and Customs duties based on a US$15 price instead of US$10. However, bear in mind that the GCT is recoverable in the conduct of business and the increased cost of US$15 reduces Company X's net taxable profit. Additionally, Company X has already stashed away US$5 abroad without paying any withholding tax.
SUBSTANTIAL LOSS
It is full time that the Government realises that transfer pricing represents a substantial loss to the revenue. In practically every area of taxation there are persistent problems. The Government would do us all a favour by putting a freeze on new taxes, halt the increase of user fees and concentrate on placing the tax machinery on a businesslike and professional footing. We desperately need an education campaign to encourage vigilance on the part of consumers about this GCT scam. Every consumer should be on the alert for businesses charging GCT unlawfully and take the invoices to a tax office.
Compliance does not merely mean sitting in an office and calling apparently delinquent taxpayers. These officers need to be on the road, helping to educate consumers and business people alike. I believe that many small business persons would file their returns if they got some assistance. The tax administrators should be going to them and helping them to set up systems so that at the end of each month they are in a position to file their returns in the case of GCT.
Another direction in which Dr. Davies and his band of tax administrators have not been looking is the hotel industry. Is the hotel industry carrying a fair share of the tax burden? If you have stayed in a hotel recently, go back and examine your bill and notice the amount of taxes that you paid. The hotel industry is raking in good money; how long will its tax holiday last? Why should the hotel owner get tax-free status when his secretary has to pay a myriad of taxes on her meagre earning?
Dennie Quill is a veteran journalist who may be reached at denniequill@hotmail.com.
