Regardless of your company’s status or size, there are some very important tax compliance issues that you need to know about. There are taxes that are specifically applicable to you, such as corporate income tax, property tax, and the General Consumption Tax. In addition, you may also be affected by the Charities Act.
Property tax
Historically low property tax compliance has been a cause for concern for Jamaicans for decades. However, the reasons for low tax collection have yet to be pinpointed.
The literature on property taxation has largely focused on the economics of the tax and its possible benefits. For instance, it’s not uncommon for governments to offer extensive tax exemptions to various classes of property owners. This, coupled with the high costs of land registration, creates a hierarchical structure of tenure rights that exacerbates the problem.
The tax literature also suggests a rational economic trade off between the benefit of evading tax and the risk of a fine. Moreover, the property tax has the potential to stimulate land use efficiency and create accountability for local citizens. However, the question remains as to how to achieve effective compliance, which includes the oh-so-important role of enforcement by local authorities.
A new study published by the European Real Estate Society and funded by the Jamaican government sheds light on the practical working of the property tax administration system in Jamaica. The study seeks to identify the most important factors affecting property tax compliance in the country. Specifically, it examines the effect of property valuation on tax compliance, the role of interest charges and the need for a common spatial data infrastructure.
The study’s results show that, for example, a computer-aided mass valuation system has the potential to reduce the time and cost of the property valuation. A digital property register can overcome the capacity constraints faced by developing countries.
The study’s results also show that an accounting system is essential for monitoring and evaluating property tax collections. It may also be appropriate to include higher-level government officials in the design of the tax. A revaluation exercise is conducted on a ten-year cycle.
The most important lesson from the study is that it’s time to take the property tax system seriously. Research into the best ways to improve property tax compliance is imperative. In the short term, the government has announced that it will cut the rate to 0.8 per cent from 1.3 per cent. This is expected to boost tax revenues by $3.9 billion.
General consumption tax
During the late 1980s, the Government of Jamaica began to review the indirect tax regime and the tax system. It constituted a Tax Performance Committee to examine the tax system and recommend changes. The Committee’s report provided a thorough review of the various indirect taxes and proposed changes in the tax system.
It also suggested a reduction in the General Consumption Tax (GCT) rate to 15%. The reduction was implemented through the Provisional Collection of Tax (General Consumption Tax) Order 2020, which was published in the Jamaica Gazette on 30 March.
The GCT is imposed on the supply of goods and services in Jamaica. It is applied at each stage of the production chain, from the producer to the consumer. The GCT rate is currently 16.5% and will be reduced to 15% from 1 April 2020.
There are some exemptions to the tax including unprocessed foodstuffs, professional services, insurance services, telephone services, and certain services from overseas connected parties. However, there are still questions surrounding the taxation of second-hand goods.
The General Consumption Tax acts as an indirect tax and is not included in the business profits of the taxpayer. The tax is remitted to the Collector of Taxes. The tax is applied on the value of goods at each stage of the production chain, from producer to consumer.
The tax rate is calculated on the net tax due. The registered taxpayer is required to calculate his/her tax and file a GCT return for each taxable period. The registered taxpayer must make his/her accounting records available for inspection. The tax must be remitted within 30 days of the end of the taxable period.
A tax invoice form is available for certain types of business. Gas stations, supermarkets, and car parks are all required to use this form. The registered taxpayer must also provide the tax amount for each taxable period in a tax statement.
The General Consumption Tax has been applied to the supply of goods and services in Jamaica since 1991. The standard rate is 15%. However, higher rates apply to certain goods.
Corporate income tax
Currently, there is no countrywide taxation of corporate income. However, there are several aspects of corporate income that interest tax officials. For instance, profits of resident multinational companies are taxable in most countries, including Jamaica. It is also possible to exempt certain types of income, such as passive income or charitable organizations. Some countries even allow a credit method to avoid double taxation.
The Ministry of Finance (MOF) has published an annual report on tax expenditures since 2010. It estimates the gap between potential revenues and actual revenues using a number of methods. This report covers the CIT, PIT, and GST. These estimates are useful as they provide a quantitative measure of how effective the GST policy is to generate revenue. It also explains how the estimates were made.
The top-down approach involves estimating the potential tax base and revenues from existing macroeconomic data. These estimates are compared with actual results to see how well the estimations are based on reality. It is also useful to compare the estimations with information available about the taxpayer’s compliance with tax law.
The bottom-up approach is an estimation technique that provides complementary information to the top-down approach. This approach can be useful when a top-down estimate fails to capture the full picture of a country’s compliance status. A bottom-up analysis should include data gathered from operational and random audits. It is also possible to use data from the BCCR to decompose the value-added and operating surplus of a single corporation into multiple activities, such as manufacturing and trade.
It is also important to consider that a number of countries use the same methodology. The same is true in Belize, where the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion is in effect. This agreement entered into force on August 1, 2022.
The RA-GAP method of estimating the gap between actual revenues and potential revenues is a useful technique to evaluate how well a policy performs. It is important to note that this method is not a perfect representation of the country’s compliance status, but it can provide a good indication of how much of a difference a policy choice can make to a country’s revenues.
Charities act
Whether you are planning to import charitable goods to Jamaica or sending donations from the Diaspora, it is important to follow the guidelines for the smooth clearance of goods. This will help you avoid confusion and allow you to be aware of all the required documentation.
A registered charitable organization will be entitled to certain tax concessions under the Act. Those organizations must keep audited financial statements and minutes of board meetings. They must also notify the authority of any changes. They are also required to deliver annual returns to the Authority. This may be subject to post audit by the Jamaica Customs Agency. If you fail to comply with these ongoing obligations, your certificate may be revoked.
When you import charitable goods into Jamaica, you must present a Tax Compliance Certificate for each shipment. During the customs clearance process, all documents must be consigned in the name of the charitable organization. The Customs Authority has published guidelines for charitable goods. You may also visit its website to learn more about the requirements.
In addition, the Ministry of Education has approved the importation of educational materials. If your organization plans to use these materials, you must register with the Department of Co-operatives and Friendly Societies. The Procurement Unit of the Ministry of Education will then approve the materials.
The Jamaica Customs Agency has also recognized the role of charitable organizations. The agency has started educating the Diaspora about the requirements of the Charities Act. As the summer season approaches, it is important to ensure that your organization is ready for customs clearance. You may also need to take into consideration other guidelines, such as how to deal with restricted funds.
In addition, you may be eligible for several tax deductions. For example, prescription medicines and certain medical supplies are exempt from VAT. Basic food items are also exempt. In addition, some construction services are exempt from VAT.
Charitable organizations are entitled to a tax relief on Additional Stamp Duty and Special Consumption Tax. Non-resident individuals are taxed on Jamaican-sourced income. They are also subject to income tax on their worldwide income.
