Accounting firm eyes tax-revenues ahead of Budget

The firm hit the TT Board of Inland Revenue’s inability to pursue tax-dodgers, and urged its reform ahead of its replacement by the TT Revenue Authority (TTRA).

KPMG called on the Government to make clear statements on the efficacy of the current tax amnesty and the recent VAT reduction, and to state their intentions on the Property Tax and a Transfer Pricing Policy for multinationals in TT.

“It will be interesting to see the revenues foregone in the form of penalties and interest as compared to the actual amount collected - especially given the skepticism meted out towards this amnesty with respect to its effectiveness given its frequency in recent years,” said KPMG. “What should be considered is increased tax audits across all sectors by the Board of Inland Revenue covering years of income, within the statute of limitation, of corporate tax payers who benefitted from the ‘boom’ years when oil prices were at their highest.” The firm wanted details of the effects of last February’s cut in the VAT-rate from 15 to 12.5 percent and the expansion of the VAT-base.

“However, many wait with baited breath to see the benefits from these initiatives,” KPMG said.

“It is hoped that the Honourable Minister will address the effectiveness of the VAT reduction in the upcoming Budget so as to give the general population some perspective on the Government’s decision.” The firm wanted an update on the Government’s plans for a Property Tax.

“However, there still remains much uncertainty about the new regime to be implemented, how residential and commercial property will be valued and the ricochet effect that this will have on citizens and companies who own property.” Urging Finance Minister Colm Imbert to state his plan of action and timelines for the Property Tax, KPMG said the proposal so far raises more questions than answers.

The firm urged the Government yo state its plans to plug the loophole posed by this country’s lack of any Transfer Pricing Regime, whereby multinationals choose which jurisdictions in which to get tax-breaks for the global operations.

Saying only the Board of Inland Revenue can invoke the Income Tax act section 67 to identify artificial transactions, KPMG warned that complex related-party structures can be used by multinationals for tax avoidance.

“The current main Tax Authority does not appear to have a structured means, if any, of treating with businesses that conceal transactions to avoid tax or operate outside the tax system.

The fact quite bluntly put, is that it is ill equipped to deal with the complexities presented in doing business in today’s world,” said KPMG.

“Issues of training and expertise will be key in ensuring the success of the TTRA but moreso, there needs to be a shift in culture to one of diligence and excellence.”