Walker wants compulsory filing of income tax returns in Jamaica

THE HEAD of Jamaica's Customs, Danville Walker, has proposed the mandatory filing of income tax returns by the island's residents as a move towards broadening the tax net, allowing for a lowering of the nominal tax rate and improving the environment for doing business and creating jobs.

"Let everybody file tax returns," Walker said in a speech Monday night at a function at which Carreras Ltd, the cigarette distribution company, awarded more than $2 million in bursaries to 40 students at tertiary institutions. "We can't cut our taxes until more of us pay taxes."

Walker's remarks were against the backdrop of his broader observation about the need to create a society in which young people, like those who received the bursaries will not only want to live, but will be able to find jobs and prospects for advancement. This, he suggested, was more possible in a buoyant, growing economy where business can thrive.

"Government and business must be in partnership," Walker said.

His comment, however, will likely further fuel an ongoing debate over how to get more people to pay taxes that has wracked Jamaican government for years, and the strategies of the current administration that include the very public seizure of assets of high profile persons, particularly entertainers.

In April 2008 Prime Minister Bruce Golding told parliament that outside of employees who had their taxes deducted at source - pay as you earn (PAYE), only 4000 individuals were on the income tax roll. The government estimated that number should be about quarter million.

Numbers doubled

Tax officials suggest that the number of individuals on the tax register may have doubled over the past two years, but there is no public indication of how much more such persons have contributed to the take in personal income tax.

In the 2009/2010 fiscal year a category of "other individuals" paid just under $3.9 billion in taxes, against the approximately $56 billion by PAYE workers, in a recession-hit economy that shed nearly 87,000 jobs in the two years since the onset of the global recession.

Between April and August, the first five months of the current fiscal year, "other individuals" paid a little over $1 billion in tax, or 25 per cent better than expected. At the same time, tax from PAYE workers, at $20.5 billion, was 11 per cent below projections.

Senior tax officials were not immediately available yesterday for comment on these figures or on Walker's argument that insisting that people file tax returns would be an incentive to pay their taxes, thus allowing the government to lower rates (25 per cent for individuals and 33.3 per cent for companies) and still leave the government with more cash to invest in education and security.

It is estimated that crime and violence robs Jamaica of between five and seven per cent of output annually and government officials concede that 10 per cent of the budget allocated to education is insufficient to fix chronic problems in the system and produce a knowledge-based work force capable of competing with modern economies.

Mandatory filing

However, Walker was insistent that it was possible to institute the mandatory filing of tax returns, notwithstanding the arguments against Jamaica's capacity to manage such a system that he encountered from a one-time senior tax official when he first broached the idea years ago. More recently, tax officials have privately raised similar concerns.

But Walker complained at the Carreras function about Jamaica's failure "to think creatively about the problems facing us" and being risk averse about solutions.

"We don't believe in taking risks, we done invest and we don't bet on winners," he said.

On the failure to invest, Walker points to his own agency, the Customs Department, where he said the government spent too little on management and equipment upgrades. He said that if the authorities steered say one per cent of the more than $74 billion brought in by international trade during the last fiscal year "you could have made fifty times more".

With regard to risk-taking, Walker drew on his own experience during his 11-year stint as director of elections, and the initial attempt to clean-up the voters list by cross-matching people on the register by fingerprints.

At the start, he explained, the Electoral Office of Jamaica paid US$20 million for a bio-metric system that did not work. Walker's fix: Shelve the system, directly hire the experts who trained young Jamaicans, who in turn got the system to work.

"We never hired another consultant during my time at the EOJ," he said.

The same, he said, was possible in fixing and growing the Jamaican economy and creating jobs. Ultimately, he argued, it was about having confidence in Jamaica and Jamaicans and finding ways to allowing people to have social and economic well-being.

"We want to earn more money (then) we have to find a way to grow business," he said.