CASH FLOW CRISIS

The Government has been criticised for delinquency in paying its bills to security firms, causing a domino effect in a lag in tax and statutory obligations.

Despite profiting from a booming multibillion-dollar industry, nearly 60 per cent of Jamaica's private security firms are in arrears, Tax Administration Jamaica (TAJ) has reported.

That translates to roughly 140 companies that are not compliant with their tax obligations, with concerns that some stakeholders may be acting with impunity.

TAJ has 240 private security firms on its records.

But the organisation that lobbies for the security industry has shot back that cash-flow woes are to blame, particularly from government departments and agencies which represent the majority of security firms' client base.

“What is even a greater revelation is that roughly 60 per cent of the service that private security firms offer is provided to the Government,” quipped Lieutenant Commander George Overton, president of the Jamaica Society for Industrial Security (JSIS), in a Gleaner interview Sunday.

“That is what is really causing the cash-flow issues out there between the clients and the Government not being able to pay on time.”

Enforcement actions have been taken against delinquent private security firms, which led to the collection of more than $178 million for the period January to December 2021.

In a Gleaner Access to Information request, TAJ said it is currently pursuing compliant actions against those private security companies in arrears as part of broader measures.

“It is necessary to note that since February 2022, some firms would have settled their arrears or would have made arrangements to settle arrears or a part thereof,” TAJ noted.

TAJ pointed out that the compliance status of firms fluctuates over time and the private security firms are no different.

The tax body said that some arrears are outstanding for longer periods, dating back as far as 2014.

The Gleaner's request for the tax authorities to divulge how much is owed by the private security companies could not be met, with TAJ providing the following explanation: “It must be noted, however, that TAJ is constrained in providing a conclusive dollar value since these amounts are subjected to challenges and other review mechanisms by the taxpayers and may be revised upon review or appeal by the relevant tribunal.”

Overton, who is also director of operations at Guardsman Group, suggested that many private security companies might be grappling with arrears because of extremely high receivables.

“If our clients don't pay us, we can't pay,” he said.

Overton said that the failure to pay security firms has jeopardised their ability to make payrolls on time and to fulfil statutory mandates.

The JSIS president argued that when security firms do not make their statutory payments, they do not get a tax compliance certificate to compete for government contracts. He said many times, even private companies are now demanding tax compliance certificates from security firms.

“It is in nobody's interest to not pay their statutory payments. It is a reality of the cash flow,” Overton added.

He said that smaller security firms are more vulnerable than the major players, but he noted that “over the period of time that this has been happening, it has really become problematic for the entire industry”.

“There has to be some kind of communication between Ministry of Finance and TAJ and the players because really and truly, I think if people were to open their books and put it on the table and say, 'Look, here are my receivables, this is the portion of it by Government, this is the portion of it by private sector', then it will shed a bright light on the situation,” he said.

Financial Secretary Darlene Morrison told The Gleaner on Sunday that she could not comment at this time on sums owed to the security sector as she would have to obtain that information from TAJ to establish the veracity of that claim.

“In the past, what we have had, not necessarily with the security companies, but with a number of entities, is that they send us information to say that the Government owes them, and when we do our checks, the majority of what they are saying is owed is not, in fact, so,” Morrison said.

She explained that the ministry found that the companies' records systems needed to be upgraded.

Making it clear that her remarks were not necessarily in relation to the security sector, the financial secretary insisted: “Generally speaking, that is what we have come across. They are not recording the payments correctly.”

Morrison indicated that in the past, payment by the Government might have been an issue, “but where the Government is now, payments should not be an issue”.

In March, it was revealed that more than 60 per cent of the island's security companies, accounting for 28 of the larger firms, have been ignoring the National Housing Trust's (NHT) demands for them to pay over the employer's portion of Trust contribution for their workers.

Winston Barnes, vice-president of the Jamaica Society for Industrial Security, the umbrella group representing the majority of the island's security firms, made the disclosure in the Revenue Court in late March after he was questioned by Justice David Batts about the rate of compliance among industry players.

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