The Board of Inland Revenue's (BIR) 2011 tax amnesty was a windfall. The BIR collected $560 million during the last tax amnesty in 2008. In 2001 the BIR collected $600 million. This time around, the tax collection office tripled the amount collected, netting $1.8 billion. And counting. The amnesty has been extended from May 31 to June 30. This latest figure surpassed the $1 billion that was originally targeted. Officials at the BIR did not realised the amnesty had crossed the $1 billion mark until May. "People usually wait last minute to do these things. I would say it was not until after the middle month of May we realised we achieved the $1 billion mark.
During the last week in May, then people started to come in large numbers," said Deokia Hosein, chairman, BIR. She described the response to the tax amnesty as "overwhelming." "We had originally expected between $800 million to $1 billion to be collected. The best amnesty was in 2001. We had a good response to it in 2001 because it was the first one," Hosein said. The response this time was much better as a lot of people were informed of their liabilities. "We still getting the figures, but we think we are pretty close to $1.8 billion," she said. Most of this tax revenue would have been collected from the energy sector as 80 per cent of taxes historically comes from this sector, she said.
"The 1.8 billion came from everywhere, like energy companies and other corporations, also individuals. Individuals were large in terms of numbers, but not in terms of dollar value. It's small people, so they don't add up to billions. The main business in T&T is really the energy sector. Eighty per cent of collections tend to come from the energy sector," she said. The current tax amnesty began on September 8, 2010, to enable taxpayers to update their taxes. The Government has repeatedly said that there will not be another tax amnesty. Hosein spoke to the Business Guardian on Tuesday at her office, Trinidad House, St Vincent Street, Port-of-Spain.
Amnesty a success
"Aggressive advertising" allowed the BIR to capture taxpayers' attention. Add to that an efficient system which allowed customers to make their outstanding payments efficiently. "We have a system that allowed to say who is owing and what we can do. We send the payment description out to you before. Once you came with that, you just walked with that and the cashier would pick that up with the bar code of the payment description slip and it reads the amount and puts it in the account system. We were able to deal with a lot more customers on a timely basis." The BIR also had customer service review.
"We had all sorts of surveys when the crowds were beginning to come to monitor how we treated customers and to have target times. If a customer said he had been in a line 45 minutes, then we would say that time is too long and not the accepted target," she said. The BIR was also able to overcome problems regarding taxpayers' addresses. "When we sent letters out and came back as not being delivered, we went through the newly-processed tax returns to see if these people changed addresses. We also had to go the extra mile when letters came back and there were liabilities to find these people.
People were paying taxes as far back as 1991. More than 90,000 letters were sent," Hosein said. The BIR hired no additional staff to deliver services to customers as its existing staff worked longer hours. "We didn't hire new people for this amnesty. We simply had employees double their hours. We opened the cashiering system from 7 am and then work shifts until 8 in the night," she said.
Gas shortage and logjams
Despite the successes the BIR has achieved from this amnesty, the deadline for paying late taxes has been because of a number of challenges. One reason was some people not being able to get to the different offices to pay their taxes. "One of the main reasons for the extension was the overwhelming response and external factors like gas shortage, and there was a problem of taxpayers not being able to get here. There was some sort of agitation over the gas and there was traffic jams around the buildings collecting the monies."
She said the BIR was able to collect taxes at all the district revenue offices: four regional offices and seven district revenue offices. At times there was a shortage of forms because of high demand. "The demand for forms was tremendous and some ran out although they also had option of downloading forms. We tried not to turn away anyone with money and even after they came after 3 pm deadline, we still accommodated them by having the gate open well after 4 pm. So people were allowed to come upstairs and pay. There are very few people who could say they were turned away," Hosein said.
Transparency, compliance
Hosein is confident that the financial system is becoming more transparent. "The whole financial system is moving to more transparency and we now getting more information from the Freedom of Information Act (FIA) on taxpayers. They are just another government arm which deals with financial transactions. If anything happens and it is of monetary value, they send the information to us. Information on people with bank accounts and mixing private bank accounts with business income, things like that. Then we'll use that information on our third party database." Collection was the first step. The second step is compliance.
"Having asked taxpayers to file their returns and pay their taxes, they now have an opportunity to do the correct thing. Now we moving into the other part, which is compliance. So these people have an opportunity during this time to pay the taxes they thought they would have missed, to get away without paying the interest." The BIR has outlined several means to achieve compliance. "One way we are doing it is by third party information; informing these people that they have not declared their income. If we have information to say that they have not declared properly, we will then ask them to see if they can comply.
"We have a third party system we call 'data warehousing,' where all information concerning payments by large companies are available. Some of it has not been assessed and they are now moving to the next step, which is, to ensure that people comply." Hosein chalks up tax delinquency to individual behaviour rather than to "sectors." "It's taxpayers' behaviour, it's not a sectoral thing. We are looking at people with low tax morale and you would get them in all jurisdictions. We have had experience with taxpayers and how they behave. I think we were aggressive in our advertising campaign."
She said that garnishing an employee's wages-money taken by an employer from an employee's income to pay back taxes-is not a "big issue" for the BIR. "We send a letter to the employer and then we decide the amount. It could be six months and we decide the quantum. Of course, we try to be as reasonable as possible. "However, employees are not the problem in getting tax because employees are required to pay the tax and, if the employer doesn't deduct it from the employee, then we go to the employer and get the tax. So it's not really a big issue for us to be garnishing. "The bulk of money come from employers and if there are any discrepancies, it's the employee who will pay."
Tax Appeal Board
For taxpayers who do not agree with BIR decisions on tax matters, Hosein said the Tax Appeal Board, which is an independent institution, exists to handle appeals. "In any tax administration, the employee's rights are important and, if they make an assessment you don't agree with, the first level is within the Inland Revenue and you object to the tax. If, at the end of it, you still don't agree with our assessment, you then go to the Tax Appeal Board and they can make a decision on it. They are part of the tax process, but they are independent from us. They will decide whether we have been correct in our assessment. The BIR is not in charge of them," she said.
Electronic invoices
Electronic invoices are the future of paying taxes. According to Hosein, invoices prepared using this system will be sent to the BIR electronically. "For our country to move forward, people must pay their taxes and the BIR is trying its best to ensure everyone pays their taxes. In the future, we want to do electronic invoices. This will totally replace paper invoices. All major tax administrations are going into electronic invoices, so unless you have an invoice that is electronically sent and notified by the Inland Revenue, it will not be recognised. In this way we are trying to get rid of the problem by verifying every invoice we have."
She said a body from within the European Union (EU) will be coming to T&T soon to assist in developing an electronic invoicing system. "We are getting people funded by the European Union (EU) who will be coming to do a seminar on the way to implement it. We want to get it started as soon as possible because of compliance problems." Hosein emphasised that the future of paying taxes is through online systems. "Of course, we are waiting for complete government legislation that will allow this, like the electronic transaction and TTBizLink. The future of taxation is in information technology. Young people will not be lining up to pay taxes again.
They will be using their laptops and phones to do this and will expect that everything be done online." Hosein said many of the international energy companies operating in T&T want to see this implemented to make paying taxes easier. "We have too many of the major players here in the energy industry to continues to operate like a small country. They are demanding that we go the way of electronic invoices. We want to become more efficient in how we operate."