Current Affairs

Current Affairs



Special tax collection drive to bridge shortfall
Observer Reporter
Friday, December 07, 2001


THE tax administration agency has launched a special drive to boost revenue collection in the face of an already $1 billion shortfall in tax intake since the September 11 terrorist attacks on the United States that sent the world's economy into a tailspin.

The campaign is targeted, in the first instance, at collecting over-due taxes, and in an effort to encourage people to pay, the tax officials say they are willing to negotiate payment schedules with delinquent taxpayers.
"The Inland Revenue Department is receptive to dialogue and payment arrangements to liquidate tax liability," said Gladstone Turner, the assistant commissioner with responsibility for compliance.

The tax authorities' announcement yesterday of their new drive to haul in the revenues, followed Tuesday's statement in Parliament by the finance minister, Dr Omar Davies, in which he outlined the impact on the fiscal revenues from three major shocks this year -- the terrorist attacks on the US, violent flare-up in Kingston in July, and flood damage last month. The shocks have resulted in a downturn in the economy, particularly in tourism and agriculture.

Davies told the legislature that revenue collection for the April to October period was only 1.5 per cent above the government's original budget target, compared to the corresponding period last year when inflows were five per cent ahead of target.

"Given the ... data, the passive trends for the rest of the year would lead to a deterioration in the fiscal deficit of around 2 1/2 percentage points of GDP, to around five per cent of GDP," Davies had said.
Davies said "such a deterioration was not acceptable, given the fact that there was a fiscal surplus in the fiscal year 2000/01".

The administration's immediate response to the problem was for Davies to head to Washington for talks with the multilateral financial agencies, where he is seeking an undertaking from the World Bank for US$75 million loan to help shore-up the economy and for the Inter-American Development Bank (IDB) to increase an already approved loan of US$40 million to US$60 million.

Additionally, the International Monetary Fund (IMF) has agreed to an adjustment of targets under its Staff Monitored Programme with Jamaica, including permitting a fiscal deficit of 4.1 per cent of GDP in the current fiscal year, against the original target of 2.8 per cent.

Additionally, Jamaica has proposed that for the next fiscal year, 2002/2003, the deficit be allowed to run at three per cent of GDP, against its earlier projection of 2.4 per cent. Inflation next year is now programmed at between five per cent and six per cent.

On the domestic front, the administration is attempting to ensure that it can hold its deficit targets by collecting more taxes and limiting its need to increase its borrowings, in a situation where debt servicing already accounts for nearly 60 per cent of budget expenditure.

In fact, in announcing its collection drive, the tax administration agency said "the move is in keeping with a mandate by the minister of finance to improve collections".

In addition to the special collection drive, the tax administration is stepping up its compliance programme. The tax authorities stressed that outstanding final returns for years up to 2000 and estimated returns for 2001 have been overdue since March 15 and they would be taking action against delinquents.

"The tax authorities will now be exercising its option of taking court action and issuing estimated assessments against companies and self-employed persons who have failed to file returns," the statement said.
Over the past two years, the revenue services have taken on an increasingly aggressive approach to collecting tax arrears in line with the stated position of the Ministry of Finance to grow tax receipts through improved compliance.

In addition to bringing delinquents to court, the tax administration has in recent months published the names of persons and institutions which have been issued orders by the court to pay tax arrears.

The measure has been working, according to director general of tax administration, Clive Nicholas, who last month reported a 13 per cent increase in voluntary compliance for the first five months of the fiscal year compared to the same period last year.

Indeed, according to figures released by Davies Tuesday, several of the major tax items were up for the April to August period, in particular PAYE, which at $7.07 billion for the period was 20 per cent ahead of the budgeted $5.8 billion.