Taxing Time of the Year

The Inland Revenue Department has signaled its intention to get tough with tax defaulters here. They announced this week that those who do not pay up stand the risk of being taken to court.

In addition to the taxes for the current period (2005 financial year) which are due next week, the department is seeking to collect at least half of the $70 million owed in back taxes.

During the course of this week, the department embarked on a public awareness drive, with the slogan, “make your taxes less taxing, ask how, comply now.” {{more}}

No one enjoys paying taxes and no matter how ingenious the Inland Revenue Department gets with its outreach programs, this will always be a taxing time of the year for those who have fallen behind in payments.

As responsible citizens, most of us understand and accept that for our country to run and for Government to be in a position to take care of us when we are at our most vulnerable, we each need to make a contribution to the government purse in proportion to our income.

However, we hope that the zeal and efficiency exhibited by the Income Tax Department is translated throughout the Government service and applied to all departments in terms of efficient use of public funds.

There are far too many Government employees who cannot, at the end of each day be satisfied that they have produced a fair day’s work. In many departments, it seems that the work is done by a few key persons, while many others while away the time playing solitaire, listening to the radio, walking the streets of Kingstown or just sitting shooting the breeze.

Right now, company tax is 40% of income, and at the highest rate, personal income tax is also 40%. $4 of every $10 earned is handed over to the Government. As taxpayers, we need the assurance that our hard earned money is being wisely spent.

We have to erase the belief among our people that once a resource is owned by “the Government,” it has no value and therefore can be wasted or abused.

Contractors doing work for the Government need to be held to a higher standard. For example, it cannot be satisfactory that a piece of road is fixed today, but within two weeks, the road is back to its original state of disrepair.

Additionally, as tax payers we must have the assurance that the tax system is fair, and that everyone, not just the easy targets, is being made to pay up. For too long, citizens on a fixed salary and businesses in the formal sector have had to carry the brunt of the burden.

That is one of the reasons we hope that the tax reform measures, including the Value Added Tax (VAT) are successfully implemented. Too many persons fall outside the tax net, or find ways to evade paying their fair share. A tax compliance level of 60 – 75% is too low.

Once the VAT is successfully in place, and the tax base is broadened, we hope the Government will sooner, rather than later, implement its 2005 manifesto promise to reduce income tax and company tax to below 30 percent at the top rate.

The current tax levels are too high, and can serve as a disincentive to industrious people. Citizens are encouraged to work hard, yet the person who decides to take a second or third job to increase their income or earns a pay increase is in effect penalized when they move into a higher tax bracket.

Struggling companies have to take loans or use money they may have otherwise re-invested to pay company tax. This is in addition to all the other taxes the business pays during the course of conducting business.

This being said, we urge citizens to comply. It is your duty and as pointed out by the IRD, they have the power to make your life very unpleasant if you do not. It should not get to that however. The tax department has indicated that it is willing to work out manageable payment terms with individual defaulters. Bite the bullet now to make it easier for Government to move forward with its proposed tax reforms which should then ease the burden on each of us, but at the same time make more money available to take our country forward.