Why evade tax evaders?

Dayton Lawton, Guest Columnist

As a nation, few would argue that we are not where we could be. Jamaica needs a politically engaged middle class as the corrective force. As a group, the middle class has often seemed unmoved by Jamaica's many societal problems, more determined to remain secluded inside the comfort of its self-imposed bubble.

Each day, month, year, more persons who identified themselves as middle class or upper-middle class have had to face the unnerving truth: They are now on the brink of extinction.

The middle class has vast economic clout, yet often remains politically marginalised in a huge democracy where the politically illiterate masses still dominate the outcome of elections and the moneyed class has the ear of politicians. For politicians, Jamaica has primarily become a site of extraction, a fight over scarce benefits and spoils, while trying to secure legitimacy and power.

The minister of finance, on April 17, 2013, glibly introduced $6.7 billion of new taxes, $2.25 billion of which is expected to come from the aptly dubbed 'withdrawal tax'. "The new tax, which will be a levy on withdrawals from deposit-taking institutions and securities dealers, will be calculated on a graduated rate system, with withdrawals of less than $1 million being subjected to a 0.01 per cent tax, and $5 million or more subjected to 0.09 per cent tax."

I would like to add my voice to the numerous Jamaicans who have protested these new taxes. I find it very troubling that the Government implements new taxes while reportedly not collecting $5.4b from 11 entities.

The response offered by various government officials, which include Her Worship Angela Brown Burke and Damion Crawford, suggests that it is a nominal amount and we can afford it, but can we really?

tax-compliance issue

Consider that according to the 2012 recommendations of the Private Sector Working Group, there were more than 62,000 companies registered with the Companies Office in 2012; 10,239 corporate income tax returns were filed for year of assessment 2011, and of those, only 3,780 returns reported a profit.

We have a significant tax-compliance issue. Instead of implementing reform that would ease the burden on the compliant taxpayers, the Government has taken the easy route to tax us some more, and we will figure out what to do with the evaders some other time.

Entrepreneurship is stifled by onerous taxation. The determined entrepreneur must manoeuvre between bureaucratic red tape, underpaid/demotivated public servants and wide-scale corruption.

We cannot tax our country into prosperity, nor can we target the same set of individuals over and over while ignoring serial evaders. The only solution to growth is a vibrant middle class, one that does not bear the disproportionate tax burden and has no unreasonable bureaucracy. I implore the minister to consider the following:

A flat GCT rate of 12.5 per cent on all items.

Lower the income-tax rate to encourage the almost two-thirds of the workforce who are unregistered to become part of the income-tax network.

Immediately remove the anti-business Minimum Business Tax (MBT) that became effective April 1, 2014. The MBT is $60,000 per annum and discourages small business owners to start a new venture, as they must commit to paying that amount before one cent of revenue is earned.

Lower the corporate tax rate being paid by businesses to grow our small-business sector and increase the less than 10 per cent compliance rate.

In the end, the system is working against everyone except the elite. We have complained enough. Perhaps, it's time for some type of action.

Dayton Lawton is a commercial analyst and has worked in the information technology field for more than 11 years. Email feedback to columns@gleanerjm.com and daytonl@gmail.com, or contact him via Twitter @daytonlawton.