By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday unveiled plans to crackdown on delinquent taxpayers owing a collective $900m by creating a unit to focus on the Government’s major revenue generators.

Philip Davis QC, presenting the mid-year Budget statement in the House of Assembly, revealed that the Department of Inland Revenue (DIR) was considering whether to follow other countries in establishing a Large Taxpayer Unit to focus on clients who both contribute the bulk of the Government’s revenues and pose the greatest non-compliance vulnerabilities.

“This is a significant reform as currently the Department has about $900m in outstanding taxes. The vast of majority of these taxes are owed by relatively small group of businesses,” the Prime Minister revealed.

“As is done in many other countries, and as is recommended in line with best practice, [the Department of] Inland Revenue is considering exploring the establishment of a Large Taxpayer Unit (LTU). This would effect better control of, and service to, those taxpayers who contribute the majority of tax revenues.”

The potential benefits, Mr Davis added, will involve “stabilising the collection of a large portion of national revenue collections, bringing predictability to revenue planning”, while enhancing compliance and improving quality of service for large taxpayers generating a significant portion of the Government’s income via VAT, import tariffs, property taxes and Business Licence fees.

Hubert Edwards, the Organisation for Responsible Governance’s (ORG) economic development chief, told Tribune Business he has “no problem in principle” with the creation of a Large Taxpayer Unit within the Department of Inland Revenue given the need to ensure all pay their fair share in taxes.

“I believe that any initiative that makes tax collection more efficient and complete is a good thing,” he added, “because obviously if a tax payable is owed and payable, then collection and enforcement has to be a part of that process. 

“To the extent an individual has a tax liability that is genuine and outstanding, they should pay, and if payment does not happen or they are significantly late one expects the Government will put in place a system and process to enhance collection.”

Mr Davis’ mid-year Budget statement gave an insight into the Government’s thinking as it seeks to boost compliance, enforcement and revenue administration in an effort to grow its income to a sum equal to 25 percent of gross domestic product (GDP) by 2025-2026 - a target that the Prime Minister himself yesterday admitted is “bold” and “aggressive”.

“The team at the Ministry of Finance, along with our international consultants, are continually exploring various revenue options that might be implemented if necessary,” he said. “There are several administrative reforms that the team has identified which will improve operational efficiencies and improve overall revenue collections.”

Besides the Large Taxpayer Unit, Mr Davis said the Government is also mulling whether to designate qualified businesses as VAT “withholding agents”. Such companies will be able to withhold the VAT payable to their suppliers and vendors on the invoices they receive, and instead directly remit due payment to the Government themselves.

It is a practice employed by other nations, and Mr Davis said: “To further strengthen VAT collections, the establishment of VAT withholding agents and the introduction of electronic fiscal devices (EFDs) is also recommended.

“As for the former option, legislation would be needed to appoint certain purchasers of goods and services as ‘VAT withholding agents’. They would be required to withhold the VAT amount when paying invoices from standard rate vendors, and remit that VAT directly to the Government on behalf of the vendor.”

The Prime Minister also confirmed that the Government is mulling whether to implement the long-talked-about idea, via legislation or agreements, for mortgage lenders to include real property tax payments in their borrower clients’ monthly repayments.

“Consideration could also be given to require that property taxes be included in the amortisation schedules of all mortgages, through both negotiated agreements with financial institutions, and via legislation,” Mr Davis said.

“The revenue impact could be significant as it would ensure the collection of real property tax revenues, and eliminate opportunities for non- payment by mortgage holders.... The Government is continuing, through data collection agreements, to exploit the use of big data techniques to detect tax evasion and avoidance.

“For instance, the Government already collects data on Airbnb rentals, which facilitates the identification of properties collecting revenue but not paying taxes. To build further on this initiative, Inland Revenue has engaged an international firm to provide data on a variety of online transactions.”

Then there is the need to build-up the Department of Inland Revenue’s expertise and human resources capacity. The Prime Minister added: “We must address the long-standing staffing challenges at the Department of Inland Revenue.

“Upon coming to office, we met the Department of Inland Revenue with 214 employees, of which only 52 were permanent and 49 seconded from other departments Fifty-four per cent of the officers were on contract, the vast majority of which have expired.

“The last person to hold the post of controller of the Department retired in 2017. Since then, no-one has been appointed to the post, or chosen to act in the capacity of controller. There have also been no appointments (even on an acting basis) to the posts of deputy or assistant controller.

“Since 2017, the Department had also experienced a very high turnover of staff resulting in the suspension of critical functions, such as audits. As a result the Department of Inland Revenue has performed poorly in ensuring that payments were submitted in a timely manner. Reforming the Department of Inland Revenue with adequate staffing is an absolute necessity.”