Gov't free to tax legal and illegal activity, Minister says
Speakers at the AMCHAM T&T Post Budget Forum pose for a group photo. At centre is Minister in the Ministry of Finance, Allyson West
Under existing legislation in Trinidad and Tobago, any revenue generating activity, whether legal or illegal is subject to taxation as the law does not distinguish between legal and illegal activity.
The challenge, Government faces, however, is identifying those people to bring them under the tax net.
And while there is nothing preventing Government from collecting taxes from those profiting off of criminal and other illegal activity, Minister in the Ministry of Finance Allyson West said a moral dilemma would be created in doing so, as taxation of activities outside of the law would legitimise them.
“I know there is a moral question as to whether we should be doing that as it would suggest that we are sort of legitimising the activity. The same question arises as to whether we should be taxing squatters with respect to the property that they are occupying.
We need to separate the legality from the tax. There is nothing that prevents us from taxing the profit while we prosecute them for the illegal activity.”
West was responding to questions at a Post Budget Forum hosted by the American Chamber of Commerce of Trinidad and Tobago (AMCHAM T&T), related to the establishment of the Revenue Authority (TTRA), which has been put forward as a more efficient tax collection system.
In 1993, the country’s revenue collection system was found to be operating at less than optimal levels, with complaints of dissatisfaction from taxpayers and evidence of inefficiencies in processes.
A 2002 Committee headed by Gordon Deane identified deficiencies in the legislative framework, anti-business rules and regulations, poor customer relations, high incidence of corruption and corrupt practices, deficient human resource management, lack of control over and accountability for budgetary allocations, inefficient systems for internal investigation and enforcement and a host of other operational issues.
West noted that since this report, only two deficiencies have been addressed in a meaningful way in the form of the introduction of the Automated System of Customs Data (ASYCUDA) and infrastructural improvements.
The establishment of the Revenue Authority, however, was delayed by the United National Congress (UNC) government which West said stopped the work as they “must have quickly realised the value that TTRA would have added, and/or the deficiencies in the current structure of tax administration but chose political expediency over good policy.”
A special majority is required to pass the Revenue Authority Bill in Parliament to introduce the new tax administration system, which is proving to be a stumbling block for the current administration.
“The Attorney General is looking at the area of the majority needed for the passage (of the Bill). To the extent that we can avoid it we will, to the extent that we cannot avoid it, we will need to rely on the support of the business and the rest of the community to apply the necessary pressure as you did with respect to the FATCA legislation to get us where we need to get to, which is one of the reasons we are trying to educate the public as to the necessity for the introduction of the TTRA.”
Nevertheless, Government intends to bring the Revenue Authority into operation in 2018.
Asked whether the new taxation system was a necessity to tax collection, West said the existing legislation allows for taxes to be applied, but the Revenue Authority will bring back proper enforcement.
“You do not need the Revenue Authority in theory to tax anybody earning income in Trinidad and Tobago because the legislation imposes tax on all of these people. What we have not seen is proper enforcement of the legislation.”
She suggested that certain groups like taxi drivers and doctors could be taxed as there is no special legislation needed to acquire the necessary information on their employment.
“…it is only where we are seeking their information from entities that are protected by law for providing that information that there should be a problem, but for example, taxi drivers have to register with the licensing office.
There is nothing which prevents the Board of Inland Revenue from seeking information from that source. Doctors have to be licensed with the Medical Board and so on, so forth.”
She said legislative change is not required in most cases, but where there is a need to impose in the law or amend the law to allow the Revenue Authority to secure the information as necessary, that will be done.
Legislative review is underway to ensure the Revenue Authority is fully empowered to “do what needs to be done”.
While the Minister could not provide an estimate of how much revenue can be gained from doctors and drivers for hire, she said the Ministry is currently being guided by global figures on companies’ and individuals’ earnings.
West also took the opportunity to respond to rumblings within the gaming industry, which has since announced mass layoffs of employees in response to proposed increased taxation on the sector.
“The comments of the gaming association are not new. Government has been concerned for quite some time about the fact that as a general rule, persons involved in this activity do not contribute in any significant way to the country’s coffers.
I don’t know if there’s anyone in this room who thinks this should continue, I certainly don’t.
While we get to the place where we introduce the gaming commission and proper systems are put in place, I think the provisions announced by the Minister are going to go forward.”
The Minister also delivered some good news on the operationalisation of procurement legislation which is expected to come into effect soon.
The President is currently reviewing applications for the Director of the procurement unit and an appointment for the position is expected before end of the calendar year.
“Once that is done, the procurement legislation will be brought into force,” she said.
Questioned on the modernisation of trade, West revealed that the issue of customs documentation being included in the Single Electronic Window would be addressed by the Trade Minister in her contribution to debate on the Budget, which is expected to begin on Friday.
“It is a focus of the Government and it is getting attention. We hope that we can see it fully operational in the not too distant future.
Once we establish the Revenue Authority and determine that this is something that is required for proper administration and processing of imports and so on, it will be easier to channel Customs in that direction.”