Tackling tax compliance

Over the years, the Government has opted to provide a battery of tax amnesties – in 2001, 2006, 2009, 2014 and 2016. Additionally, they have widened the tax base as opposed to executing initiatives which would reduce the occurrence of non-compliance.

The Revenue Authority was first proposed as a blanket solution to tackling the issue of non-compliance. But in 2010 a combination of industrial relations complications and the inability to attain a special majority led to a lapse of the Bill.

Furthermore, the tax amnesties provided had the effect of, in essence, rewarding taxpayers for their non-compliance. During periods of amnesty, the interest or penalties levied against non-compliant citizens are waived, thereby fostering a culture of evasion.

The Government has sought to widen the tax base by reimplementing the Property Tax as well as introducing a new tax bracket for both high-income earners and companies. Beginning in 2017, there will be a 30% tax on chargeable income on companies with chargeable profits in excess of $1 million per annum. While this measure can potentially increase tax revenues by an additional $560 million, it also places a heavier burden on the compliant members of society.

In the case of the business community, slowing consumer demand alongside the shortages in foreign exchange has made it increasingly difficult for businesses to thrive. Increases in both the Business and Green Fund levies in 2016, from 0.2% to 0.6% and 0.1% to 0.3%, respectively, has further compounded this burden. Ironically, the added strain on SMEs may well lower the government’s tax pool should those small and medium-sized entities be unable to continue their business operations. This counteractive measure does little to support economic growth and employment opportunities which are already in short supply in this current recession.

As it stands, we cannot continue with the existing framework which allows for a high level of non-compliance and evasion.

The T&T Chamber acknowledges that there are likely to be challenges with the implementation of a Revenue Authority, given current structures and legislation. As such, the Chamber remains open to suitable alternatives which will positively contribute towards tax compliance and improved tax collection, which need not require a special majority to be implemented.