No major difference

Tax expert Allison Peart is commending the proposed move by the Government to shift the deadline for filing income taxes from March 15 to April 15, but insists that it does not go far enough.

The shift was a part of proposed measures announced by Finance Minister Dr Nigel Clarke while making his contribution to the Budget Debate.

Currently, income tax filings are due by March 15, but the finance minister says it is suboptimal.

According to Clarke, as much as 50 per cent of annual income tax revenue is collected in the last two weeks of March as a result of this rule, making the last month of the fiscal year the highest tax-yielding month of the year.

“This reality places the Government at a disadvantage in terms of managing the fiscal operations to ensure that fiscal targets are met as by this time the budgeted expenditure should have been disbursed. However, the possibility exists that the revenue collected in March may be lower than anticipated, thereby resulting in failure to achieve the fiscal balance target,” Clarke stated.

“It does not make – and has never made – practical sense for the date of filing of income tax in Jamaica to be 15 days before Jamaica’s fiscal year ends,” Clarke told Parliament.

Decouple individual filing

Peart is of the view that the Government should move to decouple individual filing from corporate filing.

“I agree with him that it should move from March 15 and I would take April 15 because it gives more time to prepare the financial statements to prepare the returns; however, it is not enough. Moving to April 15 and not decoupling the two, you still have everything bundle up one time,” Peart told The Sunday Gleaner.

She said while individuals do not usually file returns, enough professionals do so to cause congestion.

Clarke had argued that his proposed change would also provide taxpayers with an additional month to prepare their tax returns and to make the required payment.

Peart, who is the managing director of A Peart Advisory Services, has suggested that the Government shift to having a rolling year-end for companies to file taxes and the proposed April 15 date for individuals.

Get extra time

She said some companies now, like those who have year ends at March 31, get extra time to file returns.

“So, within six months after your year ends, you should file your return. Whether you have a December year-end or June year-end, it is the same six months,” she contended.

“Government would get the money throughout the year and not wait on this bundle,” Peart added.

Clarke stated that the move would allow the Government to now collect the highest 50 per cent of annual income tax revenue in the very first month of its fiscal year with the proposed changes.

“It will give the Government the ability to take any corrective action that may be required across the remaining 11 months of the fiscal year should revenues associated with the filing deadline of income tax fall below target. This will greatly improve fiscal management and the ability of the Government to meet its annual fiscal balance target,” the finance minister reasoned.

Therese Turner-Jones, general manager of the Country Department Caribbean Group, however, believes that there is no significant benefit to be derived from the shift.

“By shifting to April 15, I am not sure what they are achieving because all you have done is move the seasonality into the next fiscal year.

“I think what they are trying to do is start of the year with a bunch of cash so they know they have these revenues and improve liquidity. At the end of the day, it may help them with their planning, but I don’t think it will make a massive amount of difference,” Turner Jones told The Sunday Gleaner.

She believes that nudges would probably yield a better outcome.

“What the minister of finance can do thinking about what behavioural economists call nudges to get people to pay on time and a more regular basis rather than having a flurry of returns coming in the last two months,” the economist said.

“The same way JPS can give discount for paying early, the tax authorities should be able to do that,” she added, referring to the power company Jamaica Public Service.

Turner-Jones pointed out that in the United Kingdom, for example, homeowners are nudged to settle their tax bills as they are told the percentage of people in their communities who have already paid.

Turner-Jones believes an improvement in the fiscal analysis capacity will give the Government greater improvement in managing its resources and identify potential shortfalls.

romario.scott@gleanerjm.com