Everald Dewar | A marriage aimed at combating tax avoidance, evasion
A number of the biggest names in technology - Apple, Microsoft, Google, etc - are among some of the top 100 publicly traded companies having profits that appeared to be generated in offshore tax havens. By having subsidiaries registered in tax havens, multinational corporations are able to avoid billions in income tax. These subsidiaries are often shell companies, having little or no employees or any real business activities.
Many large multinational corporations avoid paying taxes by using what may appear as loopholes in the laws of the country in which they are based, allowing for this to happen. Any company in Jamaica can utilise the opportunity of using legal loopholes to shift profits offshore, minimising its taxes by what is widely known as base erosion and profit shifting, or BEPS. This is the term used to describe what some can appear to the layman as 'accounting tricks' or tax planning designed by experts being strategies used by multinationals to 'shift' profits from higher- to lower-tax jurisdictions, thus 'eroding' their 'tax base'.
In her presentation at the Tax Administration Jamaica (TAJ) Transfer Pricing Agreement seminar in September 2018, Minister without portfolio in the Ministry of Finance and the Public Service, Fayval Williams, mentioned that we need to discourage such practices like BEPS.
Earlier, in November 2017, at a discussion forum 'Let's Talk Tax', the minister lauded the TAJ for its efforts under the theme 'Tax Compliance in Jamaica'. The minister said that TAJ's use of third-party information, specifically using audits and inspections to identify delinquent taxpayers, was encouraging. Additionally, the TAJ's deputy commissioner for operations indicated that the agency had surpassed revenue-collection targets over the past two years, "a feat never achieved in nine years".
At the forum, the TAJ and the Institute of Chartered Accountants of Jamaica signed a Memorandum of Understanding (MoU) - the purpose of which was to strengthen their long-standing collaboration on matters related to the country's tax system. At the signing of the MOU, the description of a "marriage" was used, hence giving an allegorical meaning to the sense of what is expected in their new relationship.
This symbolic marriage brings to mind the Cape of Good Hope on Africa's Southerly tip, where two great seas meet; one the warm Indian Ocean and the other, the chilly Atlantic. As the winds from these different seas mingle, they create a billowing cloak symbolic of the profound difference that these two contrasting institutions have on the life of taxpayers.
The one-of-a-kind ceremony was aimed, it is said, at forging a relationship, through dialogue, between the officials from both organisations on a range of issues. So whether it is a marriage for love and one made in heaven or of convenience, or it is one orchestrated for personal gain or some other sort of strategic purpose, that is yet to be seen.
If, however, the course of this marriage is to be set by that mother-in-law tone in the minister's observations that "paying taxes is a civic duty backed by law" and that the TAJ offers "carrots and whips", then the nuptials from the start may give an expectation of a relationship which one party takes with a lack of empathy. This could, so soon thereafter their first anniversary in the new year, foster resentment between the couples, an ingredient for a bad marriage.
- Everald Dewar is associate tax partner at BDO Chartered Accountants in Kingston