The Tribune

• Large Taxpayer Unit ‘just start’ of major reforms

• Focused on ‘15% that generate 80% of revenue’

• Low compliance sectors withholding agent target

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance’s top official yesterday said the Large Taxpayer Unit is “just the start” of major reforms as he revealed it is “highly probable” much of $900m in past due taxes will be collected. 

Simon Wilson, the financial secretary, told Tribune Business that the Davis administration is “pretty well advanced” in efforts to form a unit that will focus on generating greater compliance from, and providing better service to, the 15 percent of taxpayers that account for 80 percent of the Government’s revenue.

Confirming that a “joint task force” of Customs officers and Department of Inland Revenue officials has already been formed as the first step in the Large Taxpayer Unit’s creation, he added that it would enable the Government’s tax agencies to better focus resources on its greatest income contributors.

Mr Wilson, revealing that most of this “15 percent” are already tax compliant, said the main cause of them falling into arrears was often because they did not receive their tax bills. The new unit will seek to correct that, he added, especially given that large contributors to the Public Treasury typically pay quickly, and in full, once notified sums are owing.

The Prime Minister, in unveiling the mid-year Budget on Wednesday, revealed that the Department of Inland Revenue was grappling with some $900m in past due taxes that he asserted were largely owed by a “relatively small group of businesses”.

Mr Wilson yesterday voiced optimism that the Government will collect on much of this $900m, although he declined to provide a figure, as much of it has been outstanding for a relatively short period of time.

And he added that the proposed VAT “withholding agents” scheme will be targeted especially at industries with low levels of tax compliance, although none were identified as the details are still being worked out.

Suggesting that timelines for the Large Taxpayer Unit’s launch will become clearer when Philip Davis QC delivers the 2022-2023 Budget in just over two-and-a-half months’ time, Mr Wilson affirmed that work to establish this and other initiatives announced by the Prime Minister was “pretty well advanced”.

“We’ve been working for the last five-and-a-half to six months. There’s a lot of hard work going on. A joint task force is already in existence, and this is the beginning of the Large Taxpayer Unit,” he said. The Unit will focus on key taxes such as VAT, Customs duties, Business Licence fees and real property taxes.

“Eighty percent of our revenue comes from around 15 percent of our taxpayer customers,” the financial secretary said of the Unit’s target market. “Eighty percent of the revenue comes from that group.

“This allows us to improve the quality of service to the taxpayer. Most large taxpayers are compliant, and improving the quality of service to them will enhance compliance and improve cash flow.

“One of the primary reasons those taxpayers are sometimes non-compliant is they don’t get the tax invoice. If there’s large taxpayers in that group who are not compliant, it is often that they don’t get the tax invoice. If there’s a large taxpayer in that group that’s in arrears once they are presented with an invoice they normally pay.”

The Auditor General’s Office previously confirmed problems with taxpayers receiving their tax bills on time, with between 30-40 percent of real property tax invoices going astray due to incorrect addresses and being returned to the sender.

Mr Wilson thus largely exempted major taxpayers from inclusion in the group said to be owing a collective $900m to the Public Treasury. He revealed that this sum has been divided into arrears where it is “highly probable” they will be collected and then amounts that are “less probable”.

“A lot of that has been outstanding for a relatively short period of time, so most of it is in the highly probably category for collection,” Mr Wilson told Tribune Business. Such an outcome would be a major boost for a Public Treasury that needs every cent it can get.

Mr Davis on Wednesday unveiled plans to amend the VAT legislation to introduce so-called “withholding agents”. These are VAT registrant companies who 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.

“I think it’s going to improve compliance,” Mr Wilson said of the proposal. “Countries use withholding agents for sectors where there’s a relatively low level of compliance. A withholding agent doesn’t withhold 100 percent of the VAT. It withholds a portion of the VAT, and provides payment partially in cash and partially by a credit note. That’s how it works.”

He did not identify the industries it will focus on, adding: “We have some ideas, but we have not completed our review. I would wait until the experts have completed their review and say those are these sectors.

“I think it’s going to make an appreciable difference in terms of compliance. We’ve been working constantly on these processes. I think persons under-estimate how much work is involved in terms of trying to move things forward. I think by the time we reach the annual Budget, the Prime Minister will be able to talk definitively about timelines.”

Mr Wilson said the proposals for further enhancing tax administration, compliance and enforcement were all geared towards “moving closer to our target” of a 25 percent revenue-to-GDP ratio by 2024-2025 without having to introduce new and/or increased taxes. He indicated that further measures may be unveiled in the annual Budget due to be presented in the last week of May.