Taxation 1 (MGMT3051)

HISTORY OF THE
JAMAICAN TAX STYTEM &
TAX ADMINISTRATION OF
JAMAICA
 LEARNING OUTCOMES
At the end of the lesson, students should be able to:
1) Outline the history and changes in taxation in
Jamaica
2) Describe the key changes in the structure of the
Jamaican tax administration .
3) Outline the functions of Tax Administration
Jamaica (TAJ)
4) Overview of Tax Administration Reform Project
5) Overview of Tax Administration Jamaica
 HISTORY OF TAXATION & SOME
RELATED ACTS
1869 Appointment of a Collector General to collect customs &
excise duties
1919 Income Tax introduced; taxation on incomes of over £100
1922 - 1928 Tax administration structure put in place with a three member
Assessment Committee with everyone liable to tax required
to submit an annual return; right to appeal to a judge-in-
chambers and Court of Appeal.

Appeal procedures changed – taxpayer to raise objection to

Assessment Committee in 1928

1939 Series of amendments consolidated into 1939 Amendment

Act; first Commissioner of Income Tax appointed; capital
allowances introduced on property, plant & machinery.
 HISTORY OF TAXATION & SOME
RELATED ACTS
1940 In 1940 a Commissioner and a Deputy Commissioner
were appointed. The Commissioner was made a
member of the Assessment Committee.
1953 Consolidation of amendments since 1939 and
introduction of the PAYE system.
1955 In 1954 the Income Tax Law was consolidated into one
Act – Act 59 of 1954. The Income Tax (Amendment)
Act provided that all income, profits and gains were to
be taxed on the actual income of the year of assessment
– that is, the year to 31 December
1955 Assessment Committee replaced by Income Tax Appeal
Board
 HISTORY OF TAXATION & SOME
RELATED ACTS
1965 Social security system of NIS established by the National
Security Act
1971 Appeal Board abolished & Revenue Court established.
1972 Tax credit systems introduced, which is a tax incentive
which allows certain taxpayers to subtract the amount of
the credit they have accrued from the total they owe the
state.
1979 National Housing Trust Act passed
1982 Human Employment & Resource Training Act (HEART)
passed.
1983 Education Tax Act passed. Additionally, a number of tax
credits for items such as mortgage, household helper
allowance etc reaches 16
 HISTORY OF TAXATION & SOME
RELATED ACTS
1985 Revenue Administration Act passed in 1985.
Restructured tax assessment and collection of tax; income
tax, stamp duty, transfer tax, customs and excise and land
valuation established as separate departments.
1986 Under the 1986 Reform Program, the tax credit system was
replaced with standard deduction (threshold) and a flat rate
of 33 1/3 percent replaced progressive rate structure, interest
income above a certain level was taxable.
1991 In 1991 the consumption tax system was substantially
reformed with the introduction of the General Consumption
Tax (GCT) Act which saw the Excise portion of The
Customs and Excise Department separated and used to form
what was called the General Consumption Tax Department
and the introduction of a General Consumption Tax rate of
10%.
 HISTORY OF TAXATION & SOME
RELATED ACTS
1997 - Restructuring Programme funded by World Bank implemented
2001 over this period. During this period the tax registration number
(TRN) was introduced.

1998 An Act to amend the Revenue Administration Act was passed

giving legal framework for above restructuring.
2002 Tax Policy Review Committee (TPRC) set up led by Joseph
Matalon etal.
2003 Tax free status removed from some public entities such as Airport
Authority, HEART Trust & Petrojam Corporation of Jamaica.
2003 The Assets Tax (Specified Bodies) Act, 2003, imposed tax on the
value of the assets of an entity. The Assets Tax is payable at an ad
valorem rate, which is currently imposed only on specified
regulated entities, regulated by the Bank of Jamaica and
companies regulated by the Financial Services Commission.
 HISTORY OF TAXATION & SOME
RELATED ACTS
2004 TPRC’s final report completed in November, included a
package of reform proposals & endorsed a shift away
from heavy reliance on direct taxes towards indirect tax to
broaden the tax base.
2011 Revenue Administration (Amendment) Act passed, which
established Tax Administration Jamaica (TAJ)
2012 Ministry of Finance White Paper of Tax Reform published
November; states objective is “to ensure a more efficient,
equitable and simplified taxation system”
2013 Reforms continue with the modernizing of the incentives
legislation procedures; put in place to limit discretionary
powers to grant tax exemptions to entities.
 HISTORY OF TAXATION & SOME
RELATED ACTS
2013 Introduction of new Charities Act, 2013
2014 Introduction of Minimum Business Tax (MBT) from
January 2014.
2014 Introduction of Employee Tax Credit (ETC) Scheme to
encourage prompt payment of payroll deductions.
2016 - 2017  Personal Income Tax Reform, phase one – rate of
30% per annum on income in excess of $6,000,000.
 Increased thresholds of $1,000,272 and $1,500,096
for 2016 and 2017 respectively.
 Increase in Departure tax from US$14.53 to
US$35.00
 HISTORY OF TAXATION & SOME
RELATED ACTS
2019 -  Abolition of Assets Tax payable by non financial
2021 institutions.
 Abolition of the Minimum Business Tax.
 Increase in the annual GCT threshold from $3,000,000
to $10,000,000 .
 Replacement of all Ad Valorem Stamp Duty rates –
payable on any instrument in accordance with the
Stamp Duty Act, including the granting of security as
collateral for loans -with a specific (flat rate) stamp
duty of $5,000 per document.
 The Transfer Tax payable on properties to be
transferred from one owner to the other was reduced
from 5% to 2%. However, documents that have been
dated before April 1, 2019 will retain the previous
transfer fee of 5% of the value of the property.
 HISTORY OF TAXATION & SOME
RELATED ACTS
2019 -  Increase in the Transfer Tax (Estate Tax) Threshold for
2021 Estates - The tax threshold in the case where the estate
of a deceased person is to be transferred, was increased
from $100,000 to $10,000,000. Beneficiaries will be
able to use the equity in inherited property to leverage
economic opportunities.
 In April 1, 2020, the standard general consumption tax
(GCT) rate was reduced from 16.5% to 15%.
 As of year of assessment 2020, companies with
revenues of J$500,000,000 or less will be entitled to a
special income tax credit of J$375,000. This is in
addition to any available Employment Tax Credit. This
special income tax credit must be utilized in the current
year, as it cannot be carried forward or cannot result in
a tax refund for the company
 HISTORY OF TAXATION & SOME
RELATED ACTS
2019 - The rate of Assets Tax payable by financial institutions
2021 was reduced from 0.250% to 0.125%. This measure will
take effect for year of assessment 2021.
 TAX ADMINISTRATION
Tax Administration Jamaica (TAJ) operates as the
country’s premiere revenue collecting agency. In
keeping with TAJ’s mission, the primary goal is to foster
voluntary compliance, collect the revenue due in an
equitable and efficient manner, contribute to a
competitive business environment and facilitate
economic growth and development.
 TAX ADMINISTRATION
Functions
 The administration and collection of domestic tax
 The collection of revenue, other than domestic tax, the
collection of which is the responsibility of the Commissioner
General
 The administration and enforcement of laws relating to
domestic tax
 The registration , audit and assessment of taxpayers
 The development and implementation of internal policies,
systems and procedures to ensure proper implementation of
the revenue laws
 The negotiation, administration and enforcement of
international agreements relating to tax
 TAX ADMINISTRATION
Functions
 the promotion of public awareness of the importance
of the efficient and effective collection of tax and its
importance to national development
 To advise the Minister on matters of general policy in
relation to the administration and collection of tax.
 COMMISSIONER GENERAL
Functions
 Plan, direct, supervise and coordinate the activities of TAJ,
 Manage the assets and property of TAJ
 Ensure that revenue targets and performance targets are
met
 Maintain systems to promote and support voluntary tax
compliance with the revenue law
 Ensure proper and efficient performance of all functions
relating to taxpayer audit
 Ensure accurate, efficient and lawful assessment of
domestic tax
 Ensure proper and efficient collection of domestic tax
 Ensure that the best interests of Jamaica are safeguarded in
the negotiation of international taxation agreements
 TAX ADMINISTRATION REFORM PROJECT

Tax Administration Reform Project (TaxARP)

In 1994, the Government of Jamaica and the World Bank
signed a contract for the funding of a six-year project aimed at
radically overhauling the tax administration. The contract for
the development of this Tax Administration Reform Project
(TaxARP) was awarded to an American firm of consultants,
and was run from a project office with a full time Director and
supporting technical and administrative staff. Decisions on
policy issues deliberated on by the consultants were made by
a steering committee which comprised the Project Director
and all the Commissioners of the then existing tax
administration departments.
 TAX ADMINISTRATION REFORM
PROJECT
The project concentrated on five major (overlapping)
components as follows:
1. Broadening the Tax Base
2. Strengthening Organization and Management
3. Improving the Control of Tax Evasion
4. Improving Tax Collections
5. Facilitating Voluntary Compliance
 TAX ADMINISTRATION REFORM PROJECT

Broadening the Tax Base.

The basic tool for this component of the project was a unique identifying
number for each taxpayer called the TAXPAYER REGISTRATION
NUMBER (TRN) which was introduced in 1996. Any person having any
interaction with a tax administration department was required to use this
number, which would be the same number used by the taxpayer for all
taxes. This would enable the administrators to easily make linkages with
compliance status across the different tax types. Legislative changes
were also made to increase the penalties for failure by liable persons to
register for GCT, and to authorize the assessment of persons for the
period of non-registration. The number of identified taxpayers has been
increased by about 60% since the inception of the project.
 TAX ADMINISTRATION REFORM
PROJECT
Strengthening Organization and Management
Under this component of the project, a radical reorganization of the
structure of tax administration was undertaken. The main principles
being:
 Under the reform project, Tax Commissioners reported to a Director
General of Tax Administration, whose management skills together
with experience and expertise in taxation; enabled him/her to focus
on the coordination of Tax Administration and coordination of tax
administration matters.
 Tax departments no longer administered specific taxes; rather they
were organized on the basis of the functions they carried out, and
these functional responsibilities extended across all tax types.
 TAX ADMINISTRATION REFORM
PROJECT
Improving Tax Collections
Improvement in tax collections was being pursued in a
number of ways, some of which have already been
mentioned. Additionally, more collection sites were
developed, with some collection offices extending their
opening hours, better management was applied to the
handling of tax arrears, greater use made of tax courts to
enforce collections, and the addition of new computer
systems employed, making it easier to control the
collection process.
 TAX ADMINISTRATION REFORM PROJECT

Following the significant changes under TaxARP in the

1990’s, it was felt that additional changes were necessary to
bring about further improvement in the administration of
taxes in Jamaica. The International Monetary Fund (IMF)
and the Caribbean Technical Assistance Centre (CARTAC)
were invited to do a critical assessment of tax administration
operations. This revealed significant weaknesses in the
system:
 Complex & inefficient tax system
 System inefficiencies which undermines the Government’s
call for voluntary tax compliance
 Inflexible operating environment
 GoJ debt to tax collections continues to climb
 TAX ADMINISTRATION REFORM PROJECT
 Central Gov’t restrictions
 Inadequate budgetary support preventing investments in
infrastructure & technology
 Inflexible budget preventing timely response to
environmental & compliance challenges
 Inability to provide competitive compensation for highly
qualified staff
 TAX ADMINISTRATION OF
JAMAICA
 Tax Administration Jamaica(TAJ) was established on April 1,
2011 by the Revenue Administration (Amendment) Act 2011

 Tax Administrations administer taxes for the country. They

implement and enforce tax laws, and receive their mandates by
law. Tax Administrations, like private companies and other
organizations, have a core business. The core business of Tax
Administrations is the levying and collection of taxes imposed
by law. It is important that Tax Administrations establish a clear
definition of their core business from the outset and make it
known to their stakeholders.
 TAX ADMINISTRATION OF
JAMAICA
The core functions of a Tax Administration include inter alia:
A. registration of taxpayers, including detection of non-registration
and false registration;
B. processing of tax returns, withholdings and third-party
information;
C. verification or examination of the correctness and completeness
of received information (including audit activities);
D. process of enforced debt collection;
E. handling of administrative appeals and complaints;
F. provision of service and assistance to taxpayers; and
G. detection and prosecution of tax fraud.
 TAX ADMINISTRATION OF JAMAICA

The Conversion of TAJ to a Semi-Autonomous Revenue

Agency (SARA) - 2014
Principal Characteristics of a SARA
 Personnel systems that operate outside civil service
control.
 Self-financing mechanisms (often a percentage of gross
revenue collections).
 Has a Board of Directors that typically includes: the
Minister of Finance; members from other key ministries;
and private sector representatives.
 TAX ADMINISTRATION OF JAMAICA

Benefits of SARA:
 increased compliance and collection of taxes
 reduced compliance costs
 de-politicizing of tax administration
 improving the monitoring of performance of the tax
system by regular statistics, tax compliance analyses and
integration of tax and taxpayer-related databases
 comprehensive accounting for all tax revenues
 TAX ADMINISTRATION OF JAMAICA

Expected Effects of SARA

Negative Effects:
 Could create a misalignment between the policies and
objectives of the Ministry of Finance and the Tax
Administration;
 Tend to over-emphasize tax collection rather than
fundamental and more broad-based administrative reforms;
and
 Create “super entities” which, without strong and honest
leadership could lead to deeper corruption.
 TAX ADMINISTRATION OF JAMAICA

Expected Effects of SARA

Positives Effects:
 TAJ more business-like and professional;
 Less reliant on the government budget for funding;
 Greater efficiency in public resource utilization; and
 Improved taxpayer services
TAX ADMINISTRATION OF
JAMAICA
TAX ADMINISTRATION OF
JAMAICA
TAX ADMINISTRATION OF
JAMAICA
TAX ADMINISTRATION OF
JAMAICA
TAX ADMINISTRATION OF
JAMAICA
TAX ADMINISTRATION OF
JAMAICA