Broadcast Statement on Tax Collection Campaign
Delivered on
Tuesday, 10th December 2002
Senator the Honourable Asot A. Michael
Minister of State in the Office of the Prime Minister
with
Special Responsibility for Finance

TAX COLLECTION CAMPAIGN

When the Honourable Prime Minister Lester B. Bird delivered his 2002 Budget Statement, he spoke at length about the culture of tax avoidance and evasion that has unquestionably stymied Government’s ability and capacity to deliver vital services to the citizens of Antigua and Barbuda. Clearly, when the Honourable Prime Minister revealed that of 491 companies only16 accounted for 80% of total corporation tax collected, this should have signaled to all and sundry that measures to reverse this pervasive culture of non-compliance, were imminent. When the Honourable Prime Minister disclosed to the nation that there were initiatives being undertaken to strengthen the tax administration regime, in the Country, observers should have noted and deduced that the time was fast approaching when all persons, natural and corporate, would be expected to shoulder equitably the burden of nation building.

There has been more than a grain of truth in the accusation that has been continuously leveled at the Government, and at the Ministry of Finance in particular, by the business community: that the inadequate levels of revenue that are collected by the Government to fund goods and services for the nation, is a direct consequence of the ineffectiveness of its collection machinery. In this connection, what we are witnessing now – this drive to collect what is due and owing by many – is the result of the enhanced capacity of the Inland Revenue Department to assess and collect taxes that are due. The increased vigilance and enhanced capacity of the Inland Revenue Department over the preceding two years have already brought us very substantial and tangible results. The total collection from the Corporate Income tax, which was stagnating around $ 30-35 million two years ago had increased to $43 million last year, and during the first 10 months of this year, have already touched $47 million. It is projected to reach $60 million by the end of the year. This has been possible only due to the concerted team effort by the officials of the Inland Revenue Department, enhanced skills due to regular and systematic training, and a thoroughly professional and objective approach to all assessments introduced by the tax experts. The Department is now trying its best to collect the tax arrears of the delinquent businesses who have either not paid any taxes whatever in the past, or paid very negligible amounts even though they clearly owed far more to the Government in taxes. No right thinking person should try to subvert this process. By doing so, they would be placing an inordinate burden on those who pay their taxes, and aiding those who do not.

I wish now to address the allegation that businesses owned by individuals who are not sympathetic to the Government are being targeted. Over the past two years, the Inland Revenue has acquired the expertise of forensic tax experts. These experts have been significantly involved in assessing taxes owed by individual businesses and corporations. Apart from their impressive academic credentials and wealth of experience, they bring to the assessment exercise a degree of impartiality and objectivity which is in no way biased or influenced by our national politics. The amounts that have been computed were arrived at without fear or favour. In support of this, I draw to your attention to the fact that the Honourable Prime Minister and Minster of Finance, Lester B. Bird, was himself assessed in a manner that accorded him no special privileges. Following are some quotes from correspondence dated 4th October, 2002 received by the Honourable Prime Minister from the Commissioner of Inland Revenue:

“The Income Tax (Amendment) (No. 2) Act – No. 16 of 2000 provides for gross income of an unincorporated body or individual to be charged at the rate of two per centum monthly on every dollar. It further states that income should be reported and remitted within thirty (30) days of the date in which such goods and /or services were rendered.

Where a person fails to make a return within the specified time, the Commissioner may levy on the person a penalty of five hundred dollars.

It is in this context that I wish to draw to your attention the non-submission of your returns on a monthly basis on account of your rental income.

Grateful if you would respond by submitting your returns as the penalty continues to increase”.

Concerning the matter of the Honourable Prime Minister’s apparent non-registration with respect to an “Identification Tax Number”, the Commissioner of Inland Revenue cautioned in correspondence of similar date:

“Section 75A (3) of the Income Tax Act makes you liable on summary conviction to a fine of two thousand dollars and a further fine of two hundred dollars per day for every day over thirty days that you continue to operate a business without registering for the Identification Tax Number.

Your are hereby given fourteen (14) days from the date of this letter to register with the Inland Revenue Department for your Identification Tax Number failing which legal action will be taken against you”.

Fortunately, the Honourable Prime Minister ensured that legal action by the Commissioner of Inland Revenue was unnecessary by complying with the requests of the Commissioner in a timely manner.

In any event, the Inland Revenue Department has been careful to act in accordance with all relevant laws that bear on the present campaign. Unfortunately, some businesses have not effectively availed themselves of avenues of recourse that are available under the Tax Administration Act. As a consequence, businesses such as Kings Casino, Sandals Resort, C T V, and those entities that comprise the Observer Group of Companies, to name a few, are now faced with penalties as prescribed under the Tax Administration Act. For this, the Inland Revenue Department cannot and should not be faulted, and it was most unfortunate that the Leader of the Opposition in his recent press conference, referred to officers of that Department as “TAX DOGS”.

Mr. Spencer has leveled some wild allegations against the officers of the Inland Revenue Department, knowing fully well that these officers are under oath of secrecy and will not be able to disclose the specific facts of each case to members of the public to lay bare the lies propagated by him. He is merely exploiting this fact to discredit the tax administration. The reference to officers of the IRD, people who are trying their level best to save the country from economic and financial crisis, as “Tax Dogs” is obviously a deliberate attempt of the Opposition in clear connivance with the tax evaders to demoralize the officers of Inland Revenue Department who are only discharging their statutory duties without fear or favour. The attempt to discredit, demoralize and threaten civil servants should be deplored by every well-thinking citizen of this country in the strongest terms. Mr. Spencer should have known that a country does not run on populist and inflammatory speeches without any substance, a country needs taxes to provide facilities and services to the people. A country progresses when all the organs of state - the legislative, executive, judiciary and the press - when each of these vital organs understand and discharge their respective roles in a responsible manner, with the country’s welfare uppermost in their mind.

It is interesting that the Government is now being labeled as “draconian” and “without conscience” when in fact it has been generous, almost to the point of negligence, with respect to its collection effort. Year after year, Budget Statement after Budget Statement, Ministers of Finance have entreated the business community to pay its fair share – in other words, to have a sense of right and wrong and to give Caesar what is rightly his. These entreaties were ignored and are only now being heard. Companies and other businesses, for decades, contrived to pay little or no taxes, as they concealed profits by ploughing earnings back into the pockets of their owners in the forms of exorbitant salaries and directors’ fees and by using quasi accounting principles to understate drastically their taxable revenues. When the Government signaled its intention to plug this loophole by introducing the two-percent tax and the Minimum Alternate Tax, businesses which were obviously thriving, but which were declaring continuous losses for years on end, protested. “No need” they said; “Improve your collection machinery, make it more efficient and collect the taxes that are outstanding”. Ladies and Gentlemen, we are doing just that, and those who would use their captive audiences to mischaracterize our efforts as targeting businesses that are owned and operated by non-supporters, will not sidetrack us.

Mr. Spencer, has referred to certain tax assessments as being arbitrary and draconian ignoring the fact that the tax assessments were based on the records submitted before the Commissioner by the taxpayer, and in, detailing the specific reasons behind every single assessment and reassessment. He has very conveniently forgotten that many of the assesses whom he has chosen to describe as “targeted” by the tax administration have been rank defaulters in not filing the financial statements or any kind of tax returns to the Inland Revenue Department for years together. Should the tax officers overlook the fact that Companies can pay salaries upward of $ 500,000 to a single individual who is the owner of the Company and allow these stupendous amounts as a legitimate deduction without batting an eyelid? Should they not be alerted and raise questions when a Company which has been granted certain specific concessions by the Cabinet is found to be grossly misusing these concessions and evading the legitimate taxes? Should they close their eyes when Companies show huge losses continuously for 10 -20 years (and pay no taxes therefore) while the assets of such companies multiply every year and their shares appreciate phenomenally? Should they or should they not, fellow citizens, question, when companies pay millions of dollars as salaries, rent and interest, to their owners and these amounts are claimed as “eligible” deductions to depict artificial losses in their accounts for tax purposes?

Would Mr. Spencer, who has been such a vocal proponent of “arbitrary assessments” against The Observer group, inform the people of this country about how many times, since their inception, has The Observer Group submitted their tax returns to the Commissioner of Income Tax, which is a statutory obligation of every company in this country? Would he care to inform the people how much taxes they have actually paid during the last 10 years as their share of contribution to the nation building? Should we not, fellow citizens attempt to make them discharge their legitimate obligation to this country or should we look the other way when they evade their taxes in blatant disregard of all laws?

As declared in the last budget speech, the approach of our Government has been to reduce the tax rates and improve compliance by increasing the vigilance of tax departments so that the burden of nation building is shared by all equitably. As stated in the budget speech, as many as 330 of the total 491 companies in this country do not pay income tax at all, and of the 161 companies which pay some taxes, only 16 of the Companies contribute 80% of the total tax collection. Ladies and gentleman, should we allow this skewed and inequitable state of affairs to continue and not try to rectify this to make our tax system modern and rational and equitable to all?

In other countries, the tax administrators have much wider powers to search and seize evidence by conducting surprise raids in the premises of taxpayers, who have assets disproportionate to their disclosed sources of income. In Antigua and Barbuda, the tax defaulters do not simply evade the legitimate taxes, but also question the right of the Commissioner of Inland Revenue to call for information. This culture of non-compliance has to be brought to an end, and the attempts to mischaracterize the efforts of the Inland Revenue Department in this regard as draconian, is nothing but a political gambit.