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COTA newsletter_ no. - CARICOM

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					N
     CARIBBEAN ORGANISATION
               OF
E      TAX ADMINISTRATORS

W   ISSUE NO. 30               January-June 2006                ISSN 1024-7017


                                 IN THIS ISSUE

S                                   EDITORIAL
                          REGARDING HARMONISATION
              Excerpt from Survey of the The Caribbean Tax Systems by
                          Paulo dos Santos and Laura Bain
L
                               EXECUTIVE COUNCIL DESK
                          TH
                        19 General Assembly and Technical Conference
                        United States Technical Assistance Programme
E                       Areas of Responsibility –COTA Work Programme


                               COUNTRY UPDATES
T
                                      Anguilla
                                Antigua and Barbuda
                                      Dominica
                                       Guyana
                                      Jamaica
T                               Trinidad and Tobago

                                  KEEP IN STEP
                           Regional Tax Database Project

E
             Establishment of the CARICOM Single Market and Economy

                               CARICOM UPDATES
                           Tax Cases – Trinidad and Tobago
                                 Caribbean Tax Scene
R                                TAX TALK Glossary
                                        EDITORIAL
                                        EDITORIAL
TAX HARMONISATION

COTA has been mandated to collaborate with a Working Group on Fiscal Policy in
making recommendations with respect to Tax harmonization guidelines and
mechanisms. The following excerpt introduces some issues and elements of a
harmonized tax system for the Community that are worth considering as examination of
this proposed policy continues:

Excerpt from ‘Survey of the Caribbean Tax Systems’ by Paulos dos Santos and Laurel Bain.
Paper presented to 18th COTA General Assembly, July 2004 (CARICOM Secretariat website).




Tax harmonization has become more                 economic stability, crime rates, and so on.
relevant as factors of production have            In terms of tax, one key aspect is the after-
become more mobile. Currently, not only           tax rates of return on investment. Although
capital, but also goods, services and labour      the rate of return can be affected by
(in particular skilled professionals) move        different factors, the Corporate Income Tax
easily among various countries. Regional          (CIT) base and rates and the withholding
integration has further facilitated movement      taxes on remittances are highly relevant for
of goods, services and labour. The                determining it. Currently, in the Caribbean
Caribbean Single Market and Economy will          countries, tax bases and tax rates vary
not be an exception, and member countries         considerably. With respect to withholding
will have to increase their awareness of the      tax, 11 of the 20 countries have set special
issues involved in tax harmonization as it        withholding systems on the main types of
constitutes an important component of             income (interests, rents, dividends,
economic and political integration.               royalties, management fees, covenants, and
                                                  entertainers’ fees). The rates applied range
The big concern in terms of harmonization         from 10-33.33 percent. Of course, there is
is to achieve the tax arrangement that would      enough room for harmonization. Other
help enhance the community’s collective           aspects of income tax are relevant as well.
welfare. Experts have raised questions in         These include depreciation rules; allowable
this regard, but no easy answers are              deductions; the treatment of losses; the
available. Probably the best arrangement          treatment of capital gains; the provisions
for the community as a whole, would not be        relating to transfer pricing; and special
the best one for some members in                  treatment granted under programs of
particular.                                       investment incentives.

Regarding harmonization of income                 Regarding consumption tax, there is
taxation, the challenge is to create an           considerable room for harmonization around
environment that favours investment.              a broad- based VAT-type tax following the
However, investment decisions are made in         destination principle combined with excises
consideration of several factors apart from       taxes on a few items. Five countries already
the tax system: infrastructure, the               have these systems in place, and three are
availability of skilled labour, political and     in the process of introducing such systems.

2
These countries will be able to relieve              being so critical to economic integration,
exports from consumption taxes and                   that its introduction is a condition for
become more competitive. This is because             membership of the EU. Although this is less
under a VAT following the destination                relevant for CARICOM as intra-member
principle, imports are taxed at Customs and          trade is not as intense as in the EU, a VAT
exports are zero-rated. VAT is regarded as           would facilitate integration.

                                               ***


                         EXECUTIVE COUNCIL DESK




        COTA 19TH GENERAL ASSEMBLY AND TECHNICAL CONFERENCE ,
                   CASTRIES, SAINT LUCIA, 24-27 JULY 2006

Theme :       Options for Building Stronger Economies through Innovative
              Tax Policies and Administration

Topic briefs from the Conference programme

Innovations in Tax Administration of the Underground Economy

 The Underground Economy also referred to            sector in some countries can be itemized as
as the Informal Sector is composed of a              follows;
range of small- scale businesses. The
revenue loss and negative effects of such               1. Door to Door activities conducted by
unrecorded economic activities on national                 trained civilians or tax officials.
income accounting, resource allocation and              2. Distribution of guidelines/information
production cannot be over emphasized.                      kits geared to promotion of voluntary
 A main problem encountered by Tax                         compliance and educational media
administrations in monitoring and tax                      clips specially prepared for small
compliance of the underground economy                      businesses in the informal sector.
concerns the failure of small businesses to             3. Conduct of seminars to educate
register with the Tax Authorities and their                potential taxpayers.
consequent escape from the tax net;                     4. Annual license fees for businesses
Policy measures that have supported                        and professions as well as work
effective tax administration of the informal               permit fees for foreign ‘workers’ can
                                                           be charged as alternatives to the

3
       formal tax rates used for larger
       businesses.
    5. The Tax Stamp concept is aimed at                     6.    An automated system based on use
       extending the tax net to rope in all                       of a secure channel and issue of an
       small- scale self-employed persons                         e-pass. This system facilitates
       in the informal sector. This policy                        registration with issue of business
       seeks to easily identify taxpayers in                      numbers, creation of My Account,
       this category who have paid their                          forms and statements, information
       taxes. The tax stamp is issued by                          and guidelines for filing and tax
       the IRS to payees for conspicuous                          refund status reports.
       display on business premises.




Innovative Tax Policy for a Developing Economy

Innovative policies in tax administration proposed in support of economic development across
the globe may provide examples for small economies such as those of the Caribbean region.

Environment tax- these taxes have been                            In French-speaking West Africa 84%
effectively adopted in Japan                                      of taxpayers pay based on a
        Carbon Tax Plan adopted by the                            presumptive tax- Tax calculated
        Japanese Ministry of the                                  based on estimated business
        Environment to curb global warming.                       volume and living standards (amount
        Tax on all industrial activity to                         of property, number of servants,
        promote cleaner production systems                        foreign travel etc.) There is also a
        by manufacturers, farmers, fishers.                       wealth Tax in Sri Lanka.
         The charge of an environment tax
        on vehicles with high exhaust                     Tobin Tax
        emission to prevent air pollution                       *Economists focused on the Third
        and negative effects on the                             World, in proposing alternative tax
        environment/ozone.                                      policies, have suggested the
        Water Conservation Tax Ordinance                        Taxation of international transactions
        for promotion of water sanitation                       by taxing speculators on the stock
        Anti-littering tax                                      market, who through their
An Environment Levy is also charged in                          speculative activities cause irregular
Barbados, Belize, Guyana, St. Lucia and St.                     fluctuations in stock prices. The
Vincent and the Grenadines.                                     intention is to reduce speculation
                                                                and use revenues collected for
Tax on wealth:                                                  development purposes.
                                                                 (1972 Nobel Peace prize-winner
       A levy on the incomes of the                       James Tobin)
       wealthiest 10% of the population. *



                                               ********



4
    United States Department of the Treasury – Office of Technical Assistance Programme
                           Regional Management Development

The CARICOM Secretariat is pleased to                      management techniques for regional
announce the offer of the United States                    tax managers. This project features
Technical Assistance Programme under the                   seven steps which range from
auspices of The United States Department                   assessment visits, training seminars to
of Treasury, Office of Technical Assistance                technical assistance missions involving
(USOTA) in collaboration with COTA.                        consultancies with a duration of 18
                                                           months.
This programme offers to Member States                 –   a Gaming Programme intended to
opportunity to participate in international                assist countries in the development of a
cooperation in support of the generation,                  sound and fully regulated gaming
transference, adaptation and application of                sector. This project would have focus
knowledge in the field of Tax Administration               on Auditing and Collection techniques
in the Caribbean. The programme                            for tax administration of this sector but
comprises two initiatives:                                 will include other key topics such as
 – a Management Improvement                                accounting procedures and legislation
     programme intended to improve                         for regulation of the sector


                                              The overall goal of the Technical Assistance
                                            programme is to strengthen the capacity of senior
                                            level officials from Caribbean Tax Administrations.
                                            This project will improve the planning and
                                            implementation of tax reforms that would enhance
                                            the standard of living of the population.




Consultants from the USOTA visit the CARICOM Secretariat while on assessment mission to Guyana as part
of Step1 of the Management Training programme for the Region which began at the end of May 2006.

Areas of Responsibility- COTA Work Programme 2005- 2007:

The COTA Executive Council at its meeting of 2004 agreed to the following allocation of
responsibility for the various elements of the COTA Work programme. The fulfillment of these
responsibilities is linked to the achievement of the objectives of the Strategic Plan for 2006-
2008.


5
 1.      Promote and Facilitate                                      -   Convene technical
         Collaboration – Saint Lucia                                     conferences, seminars and
                                                                         workshops
           -   Convene Meetings,                                     -   Convene technical
               Conferences and workshops                                 conferences and workshops
           -   Promote technical                                         on E-commerce.
               cooperation among members
           -   Promote joint audits and joint              3.      Promote Professionalism –
               collection measures                                 Jamaica
           -   Promote exchange of
               information treaties                                  -   Conduct research on issues
           -   Increase and improve COTA                                 that impact regional tax
               publications, newsletter and                              bases e.g. the electronic
               web-page                                                  commerce sector, offshore
                                                                         financial sector,
 2.      Continuous Improvement in                                       specialization in audits and
         Efficiency of Tax Administrations                               investigations
           Trinidad and Tobago                                       -   Conduct research on Tax
                                                                         Administration reforms
           -   Prepare multi staged,
               sequential training manuals
           -   Promote national training                   4.      Promote a Masters programme
               courses                                             and a Certificate programme in
           -   Conduct regional training                           Taxation – Barbados
               courses


                                                    ***


                                COUNTRY UPDATES


                                         ANGUILLA
                                                -         Ms. Maureen Rey
                                                          COTA Correspondent


NEW TAX MEASURES FOR 2006                                 per room per night. Owners of tourism
                                                          accommodations are required to match the
The Minister of Finance in the 2006 Budget                visitors’ payments and are responsible for
Speech announced the introduction of new                  paying the levy to the Inland Revenue
legislation to collect new taxes, and                     Department on or before the 15th day of the
amendments to increase some of the                        following month.
existing taxes.
                                                          Effective January 1st, 2006, The Villa Rental
Recent Tax Legislation                                    Business Regulation Act requires that all
                                                          villas which are not for rent, but owned by
New taxes introduced were the Tourism                     foreigners are to pay a villa tax on the
Marketing Levy and the Villa Tax Bill.                    assessed value of the villa.
                                                          Owners of villas for rent are required to pay
The Tourism Marketing Levy which became                   an annual licence which is based on the
effective on April 1st 2006, charges US$1.00
total size (square feet) of the premises, and            fees have been increased by 50% and
includes covered and uncovered areas.                    Business licences which have been
                                                         increased by an average of 20% with
Tax increases have been imposed on motor                 foreigners paying an additional 50%.
vehicle licences, which have been
increased by an average of 25%, landing
                                                  ****


                               ANTIGUA AND BARBUDA
                                         -      Hyacinth Bailey
                                                COTA Correspondent


The Government of Antigua and Barbuda is in the process of reforming its taxation system. The
first step in this reform was the reintroduction of Personal Income Tax effective 1st April 2005. In
addition, some taxes such as the 2% turn over tax were repealed and the rates of some other
taxes were reduced. For example, from 1st April 2003 Company tax was reduced from 40% to
35% and from April 1st 2005 it was further reduced to 30%.

Personal Income Tax                                         e) 25% of the remainder of chargeable
Antigua and Barbuda has enacted and                            income, that is, any amount greater
implemented the New Personal Income Tax                        than $144,000.
Act in 2005. The exercise was completed in
record time and assistance was received by
CARTAC, ECEMP and the International                      The Antigua and Barbuda Sales Tax
Monetary Fund. Mr. John Murphy, a tax                    (ABST)
consultant from Canada was attached to the               The next step of the tax reform envisages
Inland Revenue Department from January                   the development and introduction of the
2005 to May 2006 to assist in the                        modern value-added-type sales tax to be
introduction of the new taxes. He was                    called the Antigua and Barbuda Sales Tax
sponsored by CARTAC.                                     (ABST). The ABST is expected to deliver
The Personal Income Tax Act establishes a                long-term improvements to the Antigua and
special fund to be known as the                          Barbuda economy. These improvements
Stabilization Fund into which all moneys                 will     be     reflected     in     increased
collected under the act shall be paid.                   competitiveness, a strengthened investment
Rates of Tax                                             climate and increases- in revenue. The
In respect of the income year 2006 and                   ABST will be an indirect tax on the
subsequent years:                                        consumption of goods and services in
    a) 0% of chargeable income of $36,000                Antigua and Barbuda and will be calculated
        or less, being the personal                      and paid on the import of goods and at all
        allowance.                                       stages of the supply chain. The tax will also
    b) 10% of the first $12,000 of                       apply to services, including some imported
        chargeable income, that is, from $1-             services.. The ABST is intended to be
        $12,000.                                         collected by ABST registrants, who will
    c) 15% of the next $72,000 of                        include the ABST into their prices, so that it
        chargeable, that is, from $12,001 -              is ultimately paid by the final consumer. The
        $84,000.                                         tax will not apply to the profits of producers
    d) 20% of the next $60,000 of                        or suppliers of goods and services. The
        chargeable income, that is, from                 proposed implementation date for the ABST
        $84,001-$144,000.                                is the third quarter of 2006 and the rate

7
proposed is 15 % with a lower rate of 10.5%           to the CARICOM Secretariat, as             tax
for hotels.                                           consultant to assist with this exercise.

Property Tax                                          Gaming Regulatory Training Program
The Property Tax Act 2000 has as its basis            In March of this year an Anti-money
the “Current Construction Replacement                 Laundering/Combating Terrorist Financing
Cost,” however there is an effort to improve          workshop for Caribbean Regulators of
the system by changing the legislation.               Casinos and Internet Gaming Entities was
                                                      held in Antigua and Barbuda. Resource
                                                      persons came from the Department of the
                                                      U.S. Treasury, Office of Technical
                                                      Assistance, The International Monetary
There is draft legislation which is expected          Fund, Control Policy in Antigua and the
to take into consideration the market value           Financial Services Regulatory Commission
of the land and building and this legislation         also in Antigua.
is due for parliamentary debate. Property is          At present there is a three week Gaming
expected to be classified according to its            Regulatory Training Workshop which
use which includes residential, agricultural,         commenced on the 12th June. The
commercial, institutional, cultural and               participants will learn how to audit Casinos
historical. There will be an annual declared          among other subjects.
percentage rate but this has not yet been
finalized.
The government has engaged the services
of Mr. Carey Thompson, former tax advisor

                                                ***

                                         DOMINICA
                                                 -    Ian- Michael Anthony
                                                      COTA Correspondent:


Value Added Tax:-
As part of the on-going tax reform program,           Provision is made for some items to be
the Value Added Tax was implemented on                exempt and others zero-rated in the Value
March 1, 2006. The V.A.T replaced:-                   Added Tax Act. Some examples are:-

    •   Consumption Tax;                              Exempt:-
    •   Entertainment Tax;                               • A supply of financial services;
    •   Hotel Occupancy Tax; and                         • A supply of education services; and
    •   Sales Tax.                                       • A supply of unprocessed agricultural
                                                           products by the producer.
To date over six hundred (600) taxpayers
have been registered to collect the tax. In           Zero-rated:-
order to qualify for registration, taxpayers             • A supply of fuel; and
must generate annual gross sales in excess               • A       supply   of     the   following
of EC$60,000. The standard rate of the tax                   goods:Flour, Milk, Rice, Sugar
is 15%, with 10% being charged on
accommodation in hotels, inns, guest
houses and similar establishments as well
as on dive packages.
8
Achievements
Mr. Desmond Wyllis recently returned to the
Dominica after the successful completion of             Technical Assistance:-
his MBA program in the United States. He                Dominica has started the compliance and
has since resumed duties as the                         risk assessment program with a focus on
Comptroller of Inland Revenue.                          cross-checking, V.A.T. refunds and V.A.T.
                                                        audit file selection. This has been made
Appointments:-                                          possible through the assistance of
Miss Rochelle Casimir, Mrs. Denise Dowe                 C.A.R.T.A.C. who contracted two Risk
and Mr. Oliver Burton have been appointed               Assessment Experts for the period May 11
to the post of Deputy Comptroller.                      – 30, 2006.

Tax Awareness Week:-
The annual ‘Tax Awareness Week’ was
held March with the focus being on the                  Inland Revenue Regional Games:-
Value Added Tax. The Division embraced                  A team of thirty-four (34) Revenue Officers
the opportunity to further explain the various          represented Dominica at the ninth annual
aspects of this new tax to the general                  Inland Revenue Regional Games held in
public.    At the opening ceremony to                   Trinidad and Tobago. We would like to let
commence the week’s activities, a donation              everyone know that we had a wonderful
from members of staff was made to the                   time. Thanks to ours hosts – you did a
Grotto Home for the homeless – a                        splendid job.
charitable organization.
                                                 ****
                                           GUYANA
                                             -    B. Hussein
                                                  COTA correspondent


Legislative Changes                                     81:01 to include a Taxpayer Identification
                                                        Number for registering taxpayers. This law
Income Tax Amendment                                    seeks to ensure that all taxpayers are
                                                        assigned a unique Taxpayer Identification
                                                        Number (TIN). The TIN is intended for
The Income Tax Act Chap. 81:01 was                      proper identification of Taxpayers, to
recently amended to reflect the changes to              improve the level of compliance and
the Income Tax threshold and the rate of                increase the efficiency in processing income
income tax. With effect from January 1,                 tax transactions.
2006, the Income Tax threshold was
increased from G$240,000.00 per annum to                VAT Implementation
G$300,000.00 per annum. The amendment                   Guyana is expected to implement the VAT
also affected the rates of taxation. A single           system of taxation from 1st January 2007.
rate of 33 1/3% replaced the previous rates             The VAT rate is set at 16% and the
of 20% on the first G$110,000.00 and 33                 threshold for the registration of business
1/3% on the remainder of chargeable                     entities is G$10 M. VAT will replace eight
income.                                                 different tax types which are currently
                                                        administered by the Guyana Revenue
Taxpayer Identification Number                          Authority and include the Consumption Tax
                                                        Act, the Travel Voucher Tax Act, the Hotel
The National Assembly recently approved                 Accommodation      Tax    Act,   and   the
an amendment to the Income Tax Act Chap.                Entertainment Tax.        To ensure the

9
successful implementation of VAT in                 Corporate Services.         Included in the
January 2007, an Implementation Unit was            proposal for the establishment of this new
established which works with various                Business Line is the organisation structure,
Divisional Heads to develop this new                the staff complement, the current and
Business Line/Department to administer              capital budget, the staff plan for recruitment,
VAT and Excise Taxes. The proposed                  which will be done in phases, and training of
name of the new Business Line/Department            staff.
is Value Added and Excise Taxes
Administration.                                     By mid-2006, preparatory work is expected
                                                    to begin on the tax roll and on promoting the
The establishment of this new Business              tax through a public awareness programme
Line will bring the number of Departments           to ensure that taxpayers and the public are
which make up the Revenue Authority to              made knowledgeable about this new tax. A
three, namely Value Added and Excise                special project team will be set up to carry
Taxes Administration, Internal Revenue and          out work relating to the above. Guidance
the Customs and Trade Administration.               and direction will be provided by the
These Departments will be supported by              members of the Implementation Unit.
two functional areas, Common Services and


Related News                                        Technology system, to be installed in the
                                                    Revenue Authority. The new system, Total
Institutional Strengthening                         Revenue Integrated Processing System
                                                    (TRIPS), brings together all registered VAT,
The Fiscal and Financial Management                 Internal Revenue, Licence Revenue and
Programme, is funded by an Inter American           Customs and Trade taxpayers onto a single
Development Bank loan and includes sub-             database previously stored separately by
component       I    ‘Tax    Policy      and        the individual Departments. Consultants
Administration’. The main focus of this sub-        from Crown Agents have been in Guyana
component is enhancing the Information              since January 2006 and are presently
Technology infrastructure and building the          involved in documenting the business
database capacity of the Revenue Authority.         processes within the Guyana Revenue
Crown Agents of the United Kingdom were             Authority before finalizing their Work Plan.
contracted to supply the new Information


                                         JAMAIICA
                                         JAMA CA
                                                -   Meris Haughton
                                                    COTA Correspondent


Jamaica Tax Administration adopts a                 Electronic Drop Boxes
“making it easy to pay” policy                      Since March 2006 taxpayers filing returns
In the past few months the Jamaican Tax             or making payments by cheques can use
Administration has introduced a number of           Electronic Drop Boxes installed at large
measures in its new “making it easy to pay”         Collectorates. Customers will receive an
policy. In addition to offering taxpayers the       Immediate receipt as proof of their
option to pay some taxes online via our             transaction, which is the essential new
website or call our toll-free service 1-888-        feature to the previous facilities.
Tax-Help for tax information, the Tax
Administration has introduced:

10
                                                  Mr. Orville Chambers (right) – Collector, Taxpayer Services
                                                  shows a customer how to use the Electronic Drop Box.



                                                         still have to visit a Collectorate to pay these
                                                         fees.

                                                         The implementation of a cashless payment
                                                         facility for the collection of fees was
                                                         introduced by the Tax Administration
                                                         Directorate in partnership with the Ministry
                                                         of Transport and Works through its agency,
Electronic Drop Boxes allow taxpayers to                 the Island Traffic Authority. This initiative is
file returns and make cheque payments for                part of Tax Administration’s programme to
all tax types and is available to customers              improve service and make paying taxes
during regular working hours.                            easier for the public and will be extended to
                                                         the remaining Motor Vehicle Examination
The introduction of the Electronic Drop Box              Depots located island wide during the 2006
facility is part of the Tax Administration’s             to 2007 Financial Year.
strategic programme to improve customer
service and make paying taxes easier for                 Collection of Tax Arrears – Since
the public. Electronic Drop Boxes will also              November 2005 the administration has
be installed at Customs locations and other              been appealing to delinquent taxpayers to
Collectorates in the current 2006/2007                   come in voluntarily to clear their tax
financial year.                                          liabilities.      Taxpayers    have      been
                                                         encouraged to make proposals to pay off
Inter-Government Collaboration: Point-                   their debts, provided that the proposed
of-Sale Service - persons may now pay                    payment schedule is accompanied by an
fees for Motor Vehicle Examination and                   initial payment. The special project which
Drivers Licence Examination directly at the              had a collection target of J$5 Billion, netted
Motor Vehicle Examination Depot using a                  J$5.6 Billion. Given the success of the
debit or credit card as a new “non-cash”                 project,     this   programme       will    be
payment system began operating on March                  institutionalised and will continue in the
2, 2006. Persons paying by cash however                  Allison Raphael 2006-2007 financial year, with
                                                         improved management and accountability
                                                         features.


                          TRINIDAD AND TOBAGO
                                              -          Allison Raphael
                                                         COTA Correspondent

Recent Tax Legislation                                   individual sixty years and over who
                                                         previously received a deduction of $40,000.
The Income Tax Act has been amended to                   All allowances save contributions to any
include a change in the level of an                      Annuity and NIS, have been removed and
individuals’ Personal Allowance from                     replaced with the above allowance.
$25,000 to $60,000 per annum. This will
also apply to the resident and non-resident              Individual Income
All income paid to a spouse or former              Data from the Human Resource Information
spouse in respect of maintenance of a child,       System will be fed automatically into the
is taxable. The current rate of tax for the        Integrated Global Systems for payment
individual is a flat rate of 25%, for all income   processing. This will incorporate both
levels. Some Benefits in Kind to individuals       personal and job related data for daily and
are now calculated on the percentage of fair       monthly paid employees. The process is
market value of items (equipment, motor            ongoing as is being piloted through the
vehicles and housing).                             Inland Revenue Division as one of the five
                                                   Ministries/Departments chosen to pilot the
 Corporate Income                                  project.
Gross sales of Approved Activity
Companies (Small Companies) are exempt                   Training Seminars/Workshops
from the Business Levy for 5 years. Tax on
Profits of these approved companies is             Seminars have been conducted on the Pay
subject to 0 % for a period of 5 years.            As You Earn System (PAYE). On most
Corporation tax was reduced to 25% from            occasions registration to participate in these
30% except for specified companies.                seminars was over subscribed. Both the
(Petrochemical companies)                          Private Sector and Public Sector have been
                                                   facilitated.
                Achievements

E-Government
                                                   The Tax Administration Improvement Unit
As part of the Reform Initiatives for the          has provided training in the development of
Inland Revenue Division (IRD) a contract           Business Plans for several Managers and
was awarded to IBM/Fast Enterprises for            Heads of Sections. Further, sessions have
the implementation of an Integrated Tax            been held in collaboration with the Human
Processing System (ITPS). To date Phase            Resource Unit (IRD) and the new systems
O of the project, which entailed the               Facilitator (Ministry of Finance - MOF) on
discovery, assessment and planning                 Public Service Reform (MOF), Vision 2020,
aspects have been completed. Phase 1 will          Performance Management and Job
start mid June 2006.                               Planning and the requirements of the
                                                   Output Management System. More
The Integrated Human Resource                      sessions are expected to be conducted in
Information System (IHRIS) and the                 the near future.
Integrated Global Payroll System (IGPS)
are new systems, which are linked, were
both introduced by the Human Resource
Unit of the Inland Revenue Division.




12
                    March Past of the COTA Regional Games 2006- Trinidad and Tobago


Regional Games                                                  These games opened on Thursday 13th
                                                                April 2006 at the Chaguaramas Convention
The Inland Revenue Division Sports and                          Centre and closed on Easter Sunday (16th
Cultural Club of the Republic of Trinidad                       April). The activities were held at the Jean
and Tobago recently hosted the 9th Annual                       Pierre Complex on Friday through Sunday
Regional Revenue Games.                                         and included a fun Saturday down the
Ten countries of the Caribbean participated                     Islands on the Treasure Queen.
in both competitive and non-competitive
(fun) games.



                                                        *****



  we must successfully tackle the harmonisation of economic, monetary, fiscal and trade
policies of participating Member States, to enable … the Single Economy, to enter into
force.     Hon. P. J. Patterson, former Prime Minister of Jamaica, CSME launching, 30 January 2006, Kingston, Jamaica
                                     KEEP IN STEP




                           Regional Tax Database Project


        Under the Caribbean Community
Single Market and Economy Work                          The project is intended to build a
programme 2004-2010 for implementation          regional network for tax data. Experts in the
of the CSME one of the areas for attention      subject field have, based on survey
is the harmonization of tax structures          information, recommended that “further
among Member States. In this regard, the        harmonization can be achieved if joint
Tax Policy and Administration Unit has          development of a new Information
responsibility for the formulation and          technology system is agreed”. In addition,
implementation of projects and initiatives      Member States are reported to have tax
intended to advance the efficiency of tax       related data recorded and stored in different
administrations in the region. In order to      formats, while some types of data are
carry out these functions, the COTA has         managed manually without a computerized
recommended in its Strategic Plan, the use      system. The regional tax database is
of available technology for training,           intended to achieve a level of harmonization
technical assistance, communicating, and        and serve as a tool for fiscal and economic
research. In this context, and supported by     policy convergence towards the
a recommendation made by the 18th COTA          achievement of economic growth and
General Assembly in 2004, the proposal to       development.
establish a Regional Tax Database has
been considered.                                         Information on a limited range and
                                                level of taxes applied in the region is
        The Caribbean Community                 currently stored in a Microsoft Excel
Secretariat (CCS) has identified as one of      programme, but there is need for a
its organizational challenges, the access to    programme to be developed that is
strategic information including databases.      customized to the requirements of a
Given the importance of this concern, the       regional tax database and which affords
Tax Unit proposes to recruit the services of    greater flexibility for capturing a wider range
a consultant to install, input and train        of fields, and sub-fields. Given the projected
relevant officers in the input, retrieval and   reform in tax structures and administration
maintenance of data using an upgraded           likely to accompany the CSME it is
CSME tax database. This type of database        important to the work of the Secretariat and
could provide information to CCS staff and      Member States that information can be
relevant government departments in              easily and accurately entered into the
Member States.                                  database and concomitantly, readily and
                                                appropriately retrieved.
                                                ****

14
         ESTABLISHMENT OF THE CARICOM SINGLE MARKET AND
                            ECONOMY
                                     SUMMARY OF STATUS OF KEY ELEMENTS

                                                       ELEMENTS
           TREATY REVISION
Currently applies to 12 of the 15 CARICOM Member States .Treaty entered into force 1 January 2006.
Eleven Member States – Antigua and Barbuda, Barbados, Belize, Dominica, Guyana, Jamaica, St. Kitts and Nevis, Saint Lucia,
St Vincent and the Grenadines, Suriname and Trinidad and Tobago have enacted Treaty into Domestic Law
         ENFORCEMENT, REGULATION AND                   SUPPORTING INSTITUTIONS
           Caribbean Court of Justice (In its Original Jurisdiction)
           Signature of Agreement- The twelve (12) Member States have signed. The Bahamas and Montserrat to sign
         Enactment of Agreement into Domestic Law-
Eleven (11) Member States have enacted legislation with respect to the Original Jurisdiction of the Court. Suriname to enact
legislation giving effect to Agreement

         FREE MOVEMENT OF SERVICES
       Removal of Restrictions to Provision of Services
Implementation of Programmes for Removal of Restrictions ( egs. of restrictions on services include Alien Landholding laws,
and residency requirements )

         FREE MOVEMENT OF PERSONS
       Free Movement of Skills
Implementation of Skills Legislation [Free movement of University Graduates] Legislation in 11 Member States

         Regulatory and Administrative arrangements for free movement of graduates. Action to facilitate free movement of
         graduates completed by 11 Member States
         Implementation of legislation for free movement of Artistes, Media Workers, Musicians, Sports persons.Eleven (11)
         Member States have explicit legal provision for free movement of artistes, media workers, musicians and sports
         persons.
         Regulatory and Administrative arrangements for free movement of Artistes, Media Workers, Musicians, Sports
         persons. Ten (10) Member States have completed action to facilitate free movement.
          Legislative and Administrative arrangements for Free Movement of Self employed service providers, entrepreneurs,
technical, managerial and supervisory staff, spouses and immediate dependent family members, persons consuming services
abroad. Chapter Three expanded the categories of persons eligible to move freely, to include Removal of Restrictions on these
additional categories at latest in accordance with the time line of December 2005.


           Facilitation of Travel
        Elimination of need for passport by CARICOM Nationals, for intra-regional travel (e.g use of ID card). Guyana has
amended its legislation to provide for acceptance of photo IDs. OECS Members accept photo-IDs from other OECS nationals
Conference agreed that a common machine-readable passport should be used for intra-regional travel
                                                        ELEMENTS
CARICOM Passport
Antigua & Barbuda introduced Passport in January 2006; Dominica introduced Passport in December 2005; Suriname introduced
Passport in January 2005; St. Vincent & the Grenadines introduced Passport in June 2005; St. Kitts & Nevis introduced Passport
in November 2005.
Lines identified for CARICOM and Non-CARICOM Nationals at Ports of entry.
All 12 Member States have implemented two sets of lines at ports of entry -
1.        •Common Lines for (their own and other) CARICOM Nationals; and
2.        •Lines for Non-CARICOM Nationals / Visitors.
3.        Montserrat also in compliance.

         FREE MOVEMENT OF CAPITAL
         Removal of Restrictions to Movement of Capital
The Thirteenth Inter-Sessional Meeting of the Conference in February 2002 formally approved the Schedules of Commitments
for removal of Restrictions by Member States, which took effect from 1 March 2002. Legislative and administrative action to be
taken by all Member States to remove restrictions to the Free Movement of Capital.
         Capital Market Integration
National Stock exchanges established in The Bahamas,
Barbados, Guyana, Jamaica, Suriname, Trinidad and Tobago and the OECS (serving all OECS Members)
Cross-listing and trading
Barbados, Jamaica and Trinidad and Tobago are the only countries comprising the Regional Stock Market. Regional Capital
Markets Committee has been developing recommendations re possibilities for Regional Stock Exchange. Caribbean Credit
Rating Agency has been established in Trinidad & Tobago. Legislative and administrative framework to be developed and
implemented to facilitate Cross-Listing and Trading by other Member States. . Work is proceeding on a new harmonized system
of incentives to take the place of the local content and export oriented incentives Act of 1973 which the WTO rules of the game
have now made obsolete.
         Intra-Regional Double Taxation Agreement
Eleven (11) Member States have signed and ratified Signature and Ratification of Agreement. Suriname to sign and ratify
Agreement and also Montserrat. Work is also in progress with regard to both regional Corporation Tax Harmonisation and a full
fledged tax harmonization policy.
Enactment of Legislation
National Legislation enacted by nine (9) Member States - Antigua and Barbuda, Barbados, Belize, Guyana, Jamaica, Saint Lucia,
St. Vincent and the Grenadines and Trinidad and Tobago. Of the Member States which have signed and ratified the Agreement,
Dominica, Grenada and St. Kitts and Nevis to enact national legislation to give effect to the Agreement. In addition, a Draft
CARICOM Financial Services Agreement has already undergone a consultations process in 10 Member States.




“The immediate challenge before us is to put the mechanisms in place to ensure
  that a Caribbean Single Market and Economy does not become a permanent
          coalition of unequals, but that its benefits are shared by all”
Rt. Hon. Owen Arthur Prime Minister of Barbados, on the occasion of the signing of the declaration, launching the CSME,
                                         30 January 2006, Kingston, Jamaica




16
                                        CARICOM UPDATES
                                        CARICOM UPDATES

TAX CASES
Trinidad and Tobago

In the matter of Rawle Sookhoo                  In the matter of Selwyn Gobin
Criminal Tax Investigator I Versus Imo          Criminal Tax Investigator I Versus Hugh
Bakari Managing Director And Bilmor             Harragan Managing Director And USA
Sewn Products Limited                           video limited
Date of Judgment: 9th February 2006             Defendant pleaded guilty on the 9th May
                                                2005
The company based in the north – east of        The company investigated by the Criminal
Trinidad - Bilmor Sewn Products- was            Tax Investigation Unit was USA Video
investigated for allegedly charging Value       Limited, a company registered under the
Added Tax (VAT) without being registered;       provisions of the Value Added Tax Act No.
i.e. illegally charging VAT and not remitting   37 of 1989 with several branches
such to the Board of Inland Revenue. The        throughout Trinidad. The company failed to
Company as well as its directors was            cause his certificate of registration or a copy
charged for the offence. After several          of it issued by the Board of Inland Revenue
adjournments, the company alone was             to be displayed in public view. The company
eventually found guilty in the Third            and director were subsequently charged.
Magistrates’ Court, Chaguanas and had           The director pleaded guilty before the
been prosecuted for seeking to recover a        Magistrate for failing to inform the Board of
sum represented to be in respect of tax         changes in the status of their business and
contrary to Section 23 (2) of Value Added       to having copies of his certificate of
Tax Act No. 37 of 1989. The company was         registration not issued by the Board of
fined $15,000.00 with an alternative of 28      Inland Revenue at their various branches.
days in jail.                                   The magistrate ordered the company to
                                                make good on the offences committed.




17
                                   CARIBBEAN TAX SCENE



Trinidad and Tobago
- Tobago News (Trinidad Express)
                                                   The Chief Secretary of the Tobago House
Recently it was disclosed that developments       of Assembly said that the Assembly had
regarding the abuse of privileges granted to      documented evidence of speculative land
a certain category of property owners now         deals undertaken by foreigners who were
warranted the government of Trinidad and          entitled to purchase up to five acres of land
Tobago and the Tobago House of Assembly           without a license. The Government was
(THA) to reinstate the necessary licensing        further informed that the foreigners had
arrangements.                                     constructed buildings that were obtained
 It has been discovered that since the 1991       under residential requirements and
Tobago Land Use study, 560 hectares have          marketed these properties as holiday villas
in fact been acquired, and it is projected that   with negligible benefits to the Revenue
this figure may double in three years with        Office and Tobago as a whole. The Chief
the foreign exchange advantages, which the        Secretary added that stamp duty was not
Euro provided some of the speculators             collected in the right amounts because the
eager to access real estate in Tobago.            properties when sold were often
                                                  understated and the overall revenue that
                                                  was obtained was negligible.

Suriname
- CCS communications Unit

Executives of the DSB bank Suriname’s             the country’s currency laws because the
oldest and most prestigious commercial            money transfers were not sanctioned by the
bank, have been charged with an alleged           Currency board. Among those charged, the
conspiracy to transfer millions of US and         owner of a Suriname Palace casino (since
other foreign currencies from a casino to a       closed) and a Surinamese businessman
foreign hotel chain- Dorsett Hotels and           claimed that casino management committed
Resorts Inc. The hotel chain and its              tax evasion with the consent of top officials
Surinamese subsidiary company (Suriname           from the Internal Revenue Service and
Leisure) were also charged. According to          these officials are implicated in the case.
the subpoena, the suspects have violated


Antigua and Barbuda
- CCS communications Unit

 The Dispute settlement body of the World         provision of cross- border gambling and
Trade Organization had last year given the        betting services from Antigua and Barbuda
United States until April 5, 2006 to introduce    to consumers in the United States.
amendments to its laws to comply with the          The gaming dispute dates back to 2003
General Agreement on Trade in Services,           when Antigua filed a formal complaint
with respect to its prohibition on the            against the US in the WTO claiming that the

18
American ban on cross- border Internet                     between foreign and local operators, which
gaming was crippling its gaming market.                    violated trade rules and had to stop.
The US federal law bars the placing of bets                 The mandated April 3rd deadline has
across state lines by electronic means.                    passed without any move to settle the
The US was told by the WTO’s appellate                     almost three year old gambling dispute.
body that in relation to betting on horse
racing, there appeared to be discrimination


Dominica
- CCS communications Unit

The Cabinet of Dominica, under the                                any other items necessary for the
chairmanship of the Prime Minister, has                           operation of the business; and
approved licenses granting concessions to
a number of private sector entities including                 •   Exemption from payment of Income
hotels, diving/sports and                                         Tax on profits.

food service companies, destination                        The granting of concessions is part of an
management company, under the country’s                    ongoing effort by Government to provide
Fiscal Incentives Act. These tax holidays,                 assistance to the private sector in order to
exemptions and waivers include: -                          stimulate growth and prosperity in the
                                                           country. Sustained economic growth is
     •   Exemption from payment of Import                  expected through its Public Sector
         Duty on motor vehicles, building                  Investment Programme (PSIP) and higher
         material, furniture and fixtures (in the          levels of private sector investment, both
         case of hotels) office equipment and              local and foreign.



                                                    ****




Squeezing Every Last Drop
Beverly Castillo-Belize

 The local bar was so sure its bartender was the strongest man around that they offered
a standing $1000 bet. The bartender would squeeze a lemon until all the juice ran into a
glass, and hand the lemon to a patron. Anyone who could squeeze one more drop of juice
out would win the money. Many people had tried over time, including the professional
wrestlers and bodybuilders, but nobody could do it. One day a scrawny little man came in,
wearing a tie and a pair of pants hiked up past his belly button. He said in a squeaky
annoying voice, "I'd like to try the bet." Even the hillbilly chicks burst into laughter.



19
After the laughter had died down, the bartender said, "Ok," grabbed a lemon, and
squeezed away. He then handed the wrinkled remains of the rind to the little man.
But the crowd's laughter turned to total silence as the man clenched his fist around the
lemon and six drops fell into the glass. As the crowd cheered, the bartender paid the
$1000, and asked the little man, "What did you do for a living? Are you a lumberjack,
weight lifter, or what?" The man replied, "I work for the GST [Government Sales
Tax]." HA HA HAhh!




                                         TAX TALK - A GLOSSARY



  Progressivity

  The phrase used to describe the steepness of the tax rate as you move up the income scale. A rate of
19% on the lowest taxable incomes and a rate of 28% on the highest is not very progressive while a low
rate of 15% and a high rate of 65% is.

Tax expenditures
Indirect government spending — the result of not collecting taxes. For example tax breaks on mortgages
and other interest costs are available to taxpayers in many countries although companies and large
investors profit most from this loophole. This type of government spending by not collecting tends to
escape public scrutiny

Bracket creep
The effect of inflation on unindexed (for inflation) income-tax rates. For example if you are at the low
rate but your income increases although just keeping pace with inflation you may end up paying a higher
rate of tax although your purchasing power stays the same.

Tax incidence
Who ends up actually paying a tax? If landlords or businesses have the ability to pass on taxes in the form
of price and rent hikes the tax incidence falls on someone else.




20
.

Direct and indirect taxes
Direct taxes are geared to the individual’s income, profit or wealth and are to some extent based on ability
to pay. Indirect taxes are levied on particular goods for example VAT or GST taxes (progressive on
imports or exports or sin taxes on alcohol, gasoline and tobacco — regardless of the individual’s ability to
pay ( regressive). Features of administration include zero rating of basic food and setting of a threshold
for qualifying businesses.

Tax havens
Low-tax jurisdictions where companies and some wealthy individuals arrange to maintain their
investments or maintain branches so their profits can surface in a low-tax environment.

Base and rate
The tax base is the income or economic activity that is subject to tax and the rate indicates how much tax
is due from each source. Some tax systems have high rates but have a narrow base, allowing for example,
generous deduction of business expenses. Other tax systems have a wide base with few exemptions and
lower rates.

Tax handles
The possibilities a government has for getting at economic activity from which they can extract tax. This
is a problem in some countries where income is either too low to be taxable or in the underground
economy beyond the reach of badly-stretched revenue departments. Many governments must rely on
import and export taxes that are levied when goods leave or enter the country.

Tax shelters
A way in which the taxpayers can park income in a particular kind of investment such as retirement
savings used by many or tax-exempt foundations for the wealthy few. It is with expectation that this
income will be taxable at some later date at a rate that is more advantageous to the taxpayer.




The tax treatment of the financial services sector is complex, not only because it is a
complicated sector, but also because it is conceptually difficult…
Like any tax policy design, it is important that the tax policies for the financial services sector
satisfy the principles of equity, simplicity and efficiency. Of particular concern with the financial
sector is to ensure that the tax system does not create distortions in the sector (for example,
between different types of financial institutions or different types of financial products).
Governments can also be prone to give this sector special treatment creating distortions
between the financial sector and other sectors due to incentives towards the inefficient
allocation of resources. At the same time, care needs to be taken with the opportunities for tax
arbitrage to which this sector is especially susceptible.
Excerpt from Options in Tax Policy and Administration for the Financial Services Sector-
Peter Mullins, Senior Economist, Fiscal Affairs department, IMF




21
     COTA Newslllettterriiis rresearrched and publlliished by::
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