EDITORIAL - Get help on tax compliance

Peter Phillips would have been absurdly naïve if he didn't anticipate the criticisms of the J$6.7 billion in new taxes, especially the levies on bank withdrawals he announced last week to close the gap in the Government's Budget. The finance minister will no doubt argue that given Jamaica's economic situation, including the reform policies upon which he has embarked, his options were limited.

But while this newspaper is sympathetic to Dr Phillips, and has been impressed with the grit with which he has largely attended the tough adjustments, we, like others, question whether the Government has been sufficiently robust in collecting the taxes that are available to it. Indeed, it is one issue that was, in our view, inadequately addressed by Dr Phillips last week when he outlined his proposals for financing this year's Budget of J$539 billion.

The Government, for instance, expects to collect J$377.6 billion in taxes this fiscal year, or approximately 10 per cent above the out-turn for 2013-2014 - a rise that is about the average for recent years. Tax receipts, over the past three years, generally hover between three and five per cent below target. On Dr Phillips' watch, the Government has been willing to cut expenditure to ensure that the fiscal targets are met.

But even this exemplary attribute is sustainable only to a point if the Government is to fulfil its basic obligations, including the maintenance of physical and social infrastructure, without resorting to a new round of wanton borrowing. In other words, it has to collect its due taxes.

Against this background, it is useful to recall the 2012 analysis by the then Private Sector Working Group (PSWG). In encouraging an overhaul of the island's tax system, it estimated that of 62,000 companies listed at the Companies Office of Jamaica, only 28 per cent, or under 7,400, were registered for tax purposes.

A little over 6,000 firms, or 10 per cent of all registered companies, actually filed income tax returns and only five per cent, around 3,000, actually paid corporate income tax.

CULPRIT COMPANIES

Bruce Golding, when he was prime minister, had a similarly stark twist in the tax data. He reported that only one per cent of registered firms paid 75 per cent of the corporate taxes and estimated that 80 per cent of the company taxes and 50 per cent of property taxes were not being collected.

But even more outrageous was the then prime minister's picture of the unfair burden borne by pay-as-you-earn (PAYE) employees - those who have their income taxes deducted at source by employers. Mr Golding estimated that, outside of PAYE workers, about quarter-million other taxpayers, such as professionals and self-employed persons, should be on the tax roll. When he spoke in 2009, there were around 4,000.

Those numbers might have improved since then, and a flat tax on small businesses implemented a year ago may have enhanced compliance. But in the absence of official data, we doubt the impact to be as yet significant.

Dr Phillips has upgraded the tax agencies to give them greater autonomy to get on with their jobs. That's good. Our other suggestion is that in the short term, he hire external people, with no Jamaican baggage, to help with the reforms and to drive compliance.

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