EDITORIAL - Why the silence on withheld tax?

Tax reform and improved governance on the part of the State were prominently positioned among the suite of what Prime Minister Bruce Golding posited as the game-changing undertakings being pursued by his administration that will lead to a socially and economically healthier Jamaica.

On the face of it, there is much in the pronouncements delivered by Mr Golding and his finance minister, Mr Audley Shaw, that this newspaper considers worthy of our endorsement.

But the devil, as the saying goes, is usually in the details, so we look forward to further and better particulars on the several initiatives and the analyses and debate that will ensue from these. Indeed, as we are too well aware, Jamaican governments are notorious for failing to fulfil obligations, including, at times, adherence to the constitutional rights of citizens.

It is in that context we note the silence of Messrs Golding and Shaw during the parliamentary debate of the 2011-12 Budget on an issue that we had urged them to address: the reimbursement of withheld taxes on interest income.

constitutional breach

First, we wish to remind of the constitutional obligation, enshrined in the Charter of Fundamental Rights and Freedoms, that people's property, "of any description", cannot be compulsorily acquired in the absence of clear principles on which compensation is to be determined and the manner in which this is to be done.

Money is included among property to which its owner must have a right to enjoyment. This is where the matter of the arrears in reimbursing withheld tax is problematic.

Interest income earned from deposits in banks and other institutions is part of the overall income on which individuals pay tax at the rate of 25 per cent, and firms, 33 per cent. However, tax on interest, at the nominal tax rate, is, under the law, withheld by the institutions and paid to the authorities.

Pension funds, and persons who have reached pensionable age, are exempt from the tax. Since the tax on interest is not a separate tax from the general income tax, individuals and firms from whose earnings it is deducted are entitled to reimbursements in the event that they do not have taxable obligations. In a sense, this withholding tax is a sort of prepayment for this category of taxpayers.

billions owed

The issue is that our Government plays fast and loose with its obligation to reimburse. It pays when it feels - and is smug about it.

For instance, it is estimated that the administration has reimbursement arrears on withheld tax of upwards of $20 billion, half of which, perhaps, belongs to pension funds. But the Government refuses to make the figure public or to say when it will pay - or how. With their money tied up at the Treasury, firms, in some cases, have to borrow to finance their operations, sometimes threatening their viability.

In essence, people are being denied their right to their property, contrary to Section 15 of the Charter of Fundamental Rights and Freedoms, or the old Section 18 of the Constitution.

The Government will face no sanctions for its misbehaviour, being required only to clear the nominal debt when it decides to pay. Yet, if individuals or firms fail to meet their tax obligations, they may be subject to interest and penalty interest - and even jail.

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