Taxation

Failure to file return

$5000 per month until return is filed up to a maximum of $1m

Key issues in the case between Bi-Flex Caribbean Ltd vs IRB

- The judge held that the commissioner must make what he honestly believes to be a fair estimate of the proper figure of assessment on the taxpayer given the assessee circumstances. -It is the onus of the taxpayer to provide sufficient evidence that the assessment is incorrect and more so that the taxpayer is to prove what then is the correct figure.

Books and records maintained must be able to show?

1. All incomes; purchase and other expenditures 2. Keep all invoices, bills, bank statements and other documents in connection with business expenses incurred. They are really evidence that money was spent and that they are related to the business.

Persons not required to declare and submit estimated taxes

1. Employees whose salaries have been already taxed at source under the PAYE system; 2. Taxpayers who earn incomes that are below the tax threshold.

Taxation of income is governed by?

1. Statutes ( income tax act) 2. Case laws 3. The practice of the tax administration (technical advisories)

Requirements of tax administration

1. That tax policy be translated into a set of laws which represent the tax system. Such legislation enables government to enforce collection of revenue. 2. To monitor tax laws in order to encourage voluntary compliance, facilitate the workings of self assessment systems and reduce tax evasion.

What are the roles of taxes in society?

1. To Finance government spending. - provision of public goods. 2. To facilitate the redistribution of resources 3. To foster economic stabilization ( control fluctuations in the economy) 4. To encourage certain economic activities, whilst discouraging others.

What is the tax administration?

A loosely defined area that embraces law, public administration, sociology and psychology as well as economics.

Who makes a return to TAJ? On behalf of the partnership?

A precedent partner is required to make a return to the Tax Administration of the total partnership income.

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases. Proportionately less tax is paid by higher income earners.

progressive tax

A tax for which the percentage of income paid in taxes increases as income increases. Proportional more tax is paid by higher income earners

proportional tax

A tax in which the average tax rate is the same at all income levels.

If no partner is resident in the island the return is made by?

An agent.

If the objection results in a favorable conclusion b/w taxpayer and tax administration

An agreement is reached and the assessment is revised and finalized and then the liability becomes owing and payable by the taxpayer and that should be paid with 30days from the day the objection was settled.

ability to pay principle

An individual pays taxes in accordance with his or her ability to pay & wealth 1. Vertical Equity- 2. Horizontal equity- similar occupational brackets

IT02

Annual return of Income and Tax Payable Regulated companies, large unregulated companies Due date: March 15th

If the taxpayer believes his/her profit levels or incomes will fall in the upcoming year what can he/she do? Like COVID-19

Apply for acceptance of a lower estimated statutory income. This request for extension of time can be made to the commissioner general (enough evidence would be needed)

Equity key principles

Benefit principle Ability to pay principle

Assessments [ sect 72 ITA]

Best Judgement Assessments - used where the taxpayer has made his return but the CGTAJ is not satisfied with what is presented. Maybe he believes that the income is understated or the expenses are overstated. He then has the authority to the best of his judgement raise an assessment on that person. -when the taxpayer has not filed a return a notice is usually issued to the taxpayer and if he/she doesn't respond to the notice within the given time frame normally 30 days and the CG is of the opinion is liable to tax then the CG can raise an assessment on the taxpayer - when the CGTAJ has new information that the taxpayer has additional sources of income and the income on the return is understated and not reflecting true financial information then the CGTAJ is able to raise an assessment. He has to have evidence of this additional income.

Other components of TAXARP 1999

Broadening the tax base Improving the control of tax evasion Improving tax collection Facilitating voluntary compliance

Commissioner General's extensive powers of enforcement

Confiscate and force the sale of assets to recover tax Garnish wages and payments due to you from third parties Impose liens on properties. Can be fined up to $2m or imprisonment if you fail to keep proper books and records or refuse to deliver tax information or provided incorrect declaration.

S04a

Declaration of Estimated income and tax payable. Self employed individuals Due March 15th Payments March 15 June 15 September 15 December 15

Legal approach to tax avoidance

Drafting legislation often involves broad sweeping end often unclear phrases Courts therefore have to interpret the meaning of legislation Judges used this literalist approach in a number of earlier tax cases

Payments- monthly payroll Taxes. What should be submitted on the s01 form?

Each month all employees' deductions for PAYE, Ed. Tax, NIS & NHT should be submitted to TAJ using S01 form

Position 2 on tax avoidance

Elaborate and deliberate strategies to avoid taxes are not in keeping with the spirit of the law

Tax Avoidance

Entails taking full advantage of the provisions of the tax codes to reduce one's tax obligations (Stiglitz 1999)

Adam Smith, The Wealth of Nations good tax system

Equity Convenience Certainty/simplicity Efficiency

File and pay estimated taxes

File estimated tax return to be delivered to the commissioner general on or before the 15th of March in the year which it relates.

What are assessments

Fixed liabilities determined by the CG TAJ to ensure that the taxpayer pays taxes that are in keeping with his income and wealth.

Concerns of the tax administration and tax collection

Hard to tax person remained outside of the tax net Duplication of duties and inefficiencies across each tax type Administration very cumbersome, inefficient and costly.

Tax Evasion

Illegal (criminal offense) arising from non payment or underpayment of tax.

6 tax bases

Income Wealth Inheritance Expenditure Documents and transactions

Types of taxes

Income taxes Value added taxes GCT Payroll taxes Asset taxes Custom duties Transfer Taxes Document taxes Stamp duty (Oats 2009)

Tax rate

Is important for two reasons 1. Tax planning purposes 2. The level of the tax influences consumer and business behavior positively or negatively.

What are the distinguishing features of a tax? Mendes 2015

It is compulsory, It is imposed on all subjects. It is imposed by the exercise of the states sovereign power. It is levied by the ordinary legislative process. It is imposed for public purpose.

Stewart's hardware and Dominion House Ltd 2005

Judge Anderson: - industry standard ratios ... I found that the use of these ISRs in the manner suggested by the evidence before me did not comprise the assessment

Statue bar- a return made in 2015 being assessed in 2022

Legal actions should not be taken on the taxpayer in relation to the 2015 return

Battle against tax avoidance

Legal approach Statutory enactments.

The Ramsay Principle

Marked a change in judicial attitude towards tax avoidance schemes Tax avoidance schemes are " actions taken to reduce or defer tax liabilities in a way parliament plainly did not intend or could not have intended had the matter been put to it. (Salter et a 2007) Judges began to look at substance over form rule in deciding in the purpose of the transaction.

Best Judgement assessment

Must be "honest guesswork" (Debbie 2013) - Bi- Flex Caribbean Ltd [1986, 1990]

The SO2 form and relevant schedules should include

Name of Employer and the TRN Name and TRN of each employee Gross emoluments and tax deducted Details of all benefits including accommodation and tax deducted. Any refunds made to employee during the year. Due on or before March 31st of the following year

Expected effects of SARA

Negatives: Could create misalignment between policies and objectives of the Ministry of Finance and the Tax Administration Tend to over emphasize tax collections rather than fundamental and more broad based administration reforms and Create super entities which without strong and honest leadership could lead to deeper corruption

Literal Approach

Observed in the Duke of WestminsterCase- lord Tomlin 1935 19 C 490 Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be

When do you file annual return?

On or before March 15 in the next year following the year of assessment on the prescribed form.

Adjustments to the tax system

Passage of Revenue administration act in 1985 Abolition of the tax credit system Introduction of the tax free threshold at $8580 in 1985 Introduction of a single flat rate of tax for income tax, for individuals at 25% and companies at 33 1/3 % Introduction of GCT in 1991 at 10% Introduction of TRN in 1993

When are the monthly payments due?

Payments are due by the 14th of the following month.

self-assessment system

Places the responsibility for the management of an individual's tax affairs firmly into the hands of the people taxpayer ( Salter et all 2007)

What are the two views relating to tax avoidance?

Position 1: tax avoidance entails acceptable tax planning strategies, where avoidance/ tax mitigation was done within scoped of Income tax act. Debbie 2013 states that any reduction of TP's income in accordance with specific deductions is allowable under the statue" - charitable contributions s13(1)(q) Lord clyde: Ayrshire Pullman motor services v CIR (1929)

Other elements of a good tax system

Productive Adjustable Political responsibility Does not create instability Encourages economic growth Consistent with government policies

Responsibility of the taxpayer

Provide information Calculate his or her own tax liability correctly Return the taxes to the tax administration

When do you pay estimated taxes?

Quarterly on or before March 15, June 15, September 15 and December 15.

If the taxpayer is not satisfied with the results of the Appeals Division, he/she can pursue the matter further in?

Revenue Court 30 days Court of Appeal Privy Council

Interest

Sect 79 (1) (b) interest is charged from the day after the date of collection, as defined in Section 78 (4) until the date of payment on all outstanding amounts under this Act. Interest is 16.02 %

The taxpayers' duties to maintain proper books and records

Sect 89 (1) ITA- every person engaged in a trade, profession or business must keep proper books of accounts in English. Sect 89 (2) ITA- a person will be deemed not to have kept proper books of account if the records do not exhibit or explain his correct transaction and financial position in the trade or business.

Penalty for non compliance

Section 41 (2) (a) states that where a person fails to pay over tax deducted at source (PAYE) these deductions shall be increased at the rate of 50% per annum from the day after the date on which payment should have been made.

S04 form

Self employed persons annual return. Due date each year March 15th

Filing of annual returns for taxpayers who receive salaries and wages

Slightly different for employees on the PAYE The employer has the legal responsibility to file returns for the PAYE taxes that are withheld. Sect (41) ; Sect 67 (7); Part 1 of Second schedule This involves preparing and delivering an Employers Annual Return on or before the 31st of March in every year to the Tax Administration (SO2) prescribed form.

Tax Administration Reform Project 1999 objectives

Strengthening the organization and management capabilities of the administration Establishing an umbrella organization JTA Implementing an integrated tax system

The self assessment system

System used in Jamaica - the primary responsibility for determining the tax payable each year falls on the individual taxpayer and not the revenue authority.

What are taxes?

Taxes are compulsory payments, enacted by the state that do not confer any direct individual entitlement to specific good or services in return. (Smith 2015)

Prescribed forms in which submissions should be made

The Declaration of estimated income tax payable are filed on prescribed forms - self employed persons - SO4 a - companies - IT07

Adopting a Purposive Approach

The Ramsay Principle or Fiscal Nullity Doctrine

tax base

The assessed value of a set of assets, (or single asset) investments or income streams that is subject to taxation

Who can grant extension to the filing of annual return?

The commissioner General can grant extension on time if he believe it is fitting to do so

What else should be reported on the S01 form

The employer's matching contributions for NHT NIS, Ed. Tax in addition to heart

Tax rate

The given percentage that is charged on the tax base.

The tax Administration's powers of assessment

The income tax act give the CG TAJ the authority to assess every person that he/she believes should be paying taxes ( or more taxes)

Who is the precedent partner?

The person that is appointed to fulfill a list of specified duties.

Partnership filing requirements

The share of income and profits from the partnership is assessable on the individual partners

The Jamaica Tax Administration has five departments

The tax administration services Taxpayer appeals department Taxpayer audit and assessment department Revenue protection division Inland revenue department

Objections Procedures

The taxpayer has the right to object to the CGTAJ assessment in writing within 30 days of the receipt of notice. The objection letter must state the precise grounds being contested. The responsibility to provide proof shifts from the tax administration to the taxpayer. The taxpayer must be prepared to provide relevant documents such as: Returns of the years of assessment that are being disputed. The proof of expenses and income and Other books and documents which may provide an understanding of the taxpayers true financial position.

average rate

The total amount of tax divided by total income

Neglecting to provide records within the set time of objection

Then the objection can be now made null and void and the assessment final and conclusive at this point the tax is payable. Sect 75 ITA

What are the other duties of the precedent partner?

To return the names and addresses of all partners To return the amount of their share of income for the year of assessment To inform the other partners of their share of profits.

Sect 65 & 66 ITA states? 3rd duty of the taxpayer

To submit a declaration of estimated income for the current year of assessment

The taxpayers' duties to file returns and make payments. File annual return

What: deliver a return of all incomes, from the previous year to the commissioner ( sect 67 (1) & (2) ITA

When is the assessment made? Guidelines

Within 6 years of the year of assessment however the CGTAJ must notify the taxpayer of the decision in writing. (Summary of fact, reasons for the decision) once it is registered/ mailed then the taxpayer is deemed to be served. If there is fraud or willful neglect there is not time limit. Sect 72 (4)

Indirect tax

a tax levied on goods or services rather than on persons or organizations. Regressive in nature

direct tax

a tax paid directly by the person or organization on whom it is levied. It is progressive in nature.

When the objection is not resolved and the taxpayer still disagrees with the CGTAJ

he or she can appeal to the tax appeals division in writing within 30 days of receipt of the notice. Proof is needed

Marginal Rate

the rate that applies to the next dollar of income