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Taxing the Jamaican Business

04/22/10

Permalink 05:13:05 pm, by amilnal
Categories: Business

Taxing the Jamaican Business

“We must never forget that it is the private sector - not government - that is the engine of economic opportunity. Businesses, particularly small businesses, flourish and can provide good jobs when government acts as a productive partner.” –Bill Richardson.

Most of the economically viable countries in the world have specific plans and or tax breaks aimed at stimulating small businesses in their countries. Several countries take it a step further and launch campaigns with the view to educate the public about the various taxes payable to the government by new and existing businesses. In 2007, the Bahamian government embarked on a month long campaign to educate their public about certain taxes. Representatives of the Bahamian Business Licence and Valuation Unit appeared on radio and television programmes, newspaper advertisements and disseminate pamphlets and brochures to get its message to the public.

However it seems that the Jamaican government has no specific campaigns to educate the public about the tax schemes and unfortunately, it is commonly felt among Jamaicans that the tax system used by their government is against local owned businesses and is especially hard on persons starting a new business.

Carlette Deleon, Public Relations Manager, Headline Entertainment explains what she sees as the main problem. “I don’t find that the government is really helpful to new business owners with regards to the tax system. There are channels that you can go to for some information, their website is appealing and you can call. But when it comes to high end, more complex tax matters, there is no definitive source or guide that you can get good advice from.”

Navigation on the internet would give you a quick rundown of some simpler taxes in the Jamaican scheme. Small Business Association of Jamaica’s website provides a direct link for new taxpayers to learn about the general kinds of business taxes such as National Housing Trust (NHT) and National Insurance Scheme (NIS), however more intricate taxes and their breakdowns are not so easily available online.

Follow up:

Internationally, Jamaica is recognized as a country with a reputation as having a high tax jurisdiction. The new Doing Business Report 2008, shows that the average Jamaican company continues to give up more than half its yearly profits in the administration and payment of its liabilities to the treasury. Jamaica's overall ranking in the broad category measuring the 'ease of doing business' plummeted to number 63, from last year's position 50, while in their assessment of the country in the 'paying taxes’ segment, the report's authors knocked the island down four places from 166 to 170.

This new ranking tags Jamaica as the ninth worse tax jurisdiction in the world. With this knowledge and the world’s economy being as unstable as it currently is, prospective local business owners need guidance about various taxes needed to regulate their businesses.

Deleon adds. “When we started 12 years ago, there wasn’t much help. I guess you go into the office and sit with an official. Now, as I said through the website they offer quite a bit of information, but only for some basic things like NHT or NIS. More complicated matters like GCT and deductibles, you will get a different answer when you go to a different tax office. When you go to Constant Spring versus Downtown or Crossroads for that matter, the more complicated the matter the harder it is and there are no hard and fast rules.”

Because of the lack of rules, many current business owners inevitably fall behind on their payments to the state which leads to the rise of the employment of private auditors and tax lawyers. Ethyln Norton-Coke, attorney-at-law, reveals some of the problems faced by new private business owners. “They (new business owners) come in and they have no clue where to go and who to go to. So most of the queries we get is about the basic workings of the system.” Even though some business owners try to comply with the regulations of the tax system, there are some however who do try to shirk from that responsibility.

In a recent article in the Gleaner, Robert Buddan, lecturer in the Department of Government, University of the West Indies, Mona Campus, outlines the problems that non-compliance by business owners can cause on the nation. “Government's figures show that only 4,000 Jamaicans are paying taxes (apart from the PAYE taxpayers). It shows that 80 per cent of company taxes and 50 per cent of property taxes are not being paid or collected. (In fact, latest figures show that only 44 per cent of property taxes were paid up to the end of March 2008). Only one per cent of registered companies account for 75 per cent of corporate taxes and 75 per cent of registered companies account for less than one per cent of corporate taxes.”

Those figures do represent a potential problem for the government with the society’s debt to the administration weighing down the nation. “Right now tax arrears amount to a shocking $138 billion while the country will be paying $140 billion in loan repayments this year. We hear about government's debts but hardly about society's debts to government, an amount that would wipe out our fiscal deficit.” Buddan continues.

However business owners still see the government and its tax system as a big stumbling block in trying to regulate their own local business affairs, says Deleon, “When you submitted your returns thinking that you have submitted all your taxes sometimes you will be reviewed or audited and government would come back and say you missed it and then on top of that. If it is an error of omission or the government didn’t communicate things effectively, they still charge us a penalty. To give you a specific example when hurricane Dean hit, they (the government) had extended the window of opportunity to pay your taxes by two days, they were open on a Saturday. They did not communicate that information very well and I didn’t pay by the Saturday, they charged me a penalty on that so I don’t find them very helpful at all.”

Miss Deleon when asked about her views on the tax system in general, did not sway from her strong stance against the government. “First and foremost, I find the tax system oppressive. To pay statuaries, to pay income tax, to pay asset tax, to pay annual returns and everything else is truly oppressive. What I think they can do is have much more clear guidelines on the website and in terms of documentation. There is very little hard and fast documentation that you can get and would like a book with the tax code beside me that I can apply to my business and that is something I just don’t have.”

The Jamaican Government has, however, made important strides in rectifying the lack of communication issue such as the recent implementation of overseas help line. “Introducing an overseas tax help toll free line is in direct response to the increasing number of queries we have been receiving from persons from abroad, particularly calls from the US and the UK” says Taxpayer Information Specialist, Mrs. Nadia McDowell-Williams. She has been with the Tax Help Unit for three years and explains that during this time although most of the calls received are from local taxpayers the unit also receives calls from other Caribbean countries, the US, Canada and Great Britain. “The request for information ranges from simple matters such as how to renew a Jamaican Driver’s Licence, getting a Taxpayer Registration Number and making property tax payments to complex issues such as the tax implications for starting a company in Jamaica and Double Taxation Agreements” she said.

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