CBSI suggests changes to tax admin bill

CBSI Governor, Dr Luke Forau
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CENTRAL Bank of Solomon Islands has suggested some changes to some sections in the Tax Administration Bill 2022.

These include Section 9, 16, 18 and the penalties in the Bill.

Governor Dr Luke Forau stated this when he appeared before the Bills and Legislative Committee in Parliament last Thursday.

The Committee was inquiring into the Tax Administration Bill.

Under Section 9 (2), it states

  1. Promoting voluntary compliance; and
  2. Compliance costs to the tax payers; and
  3. The resources available to the Commissioner.

Mr Forau said from a policy construction perspective, and relates to the principles of taxation, they think there should be one more addition to the above three.

“Now (a) implies once the time and resources spent on time on filing the returns unless, then it is expected taxpayers will contribute voluntarily.

“These are the cannons of certainty and convenience that the costs of taxpayer’s compliance to filing the returns are cheaper,” he said.

Forau said if you look at the principles of taxation, this is where the economy comes in.

He said (C) implies that IRD must be appropriately resourced to minimis the costs of administering the tax.

“Now this is also coming under the cannon of economy.

“In our view, what is missing is the equity and fairness part,” he said.

Forau said perhaps the inclusion of this section may include (D) to say promoting equitable applications of all tax laws.

He said CBSI also proposed that relevant tax, once applied, be applied to all taxpayers in this category.

“The Commissioner should apply level playing fields to companies and industries.

“There shouldn’t be any special treatment until otherwise specifies in other government policies,” he added.

He said inclusion of this equitable principles also provides a holistic approach from a tax administration perspective.

Under Section 16 it states tax payers must keep and maintain tax records.

“I don’t know if it included to have a compulsory requirement for tax payers to use cash registers so they can keep and maintain the tax records and it is also a form of providing evidence record,” he added.

Furthermore, under Section 18, it requires every taxpayer other than a non-filing tax payer must apply for a tax payer identification number (TIN).

“In our view, we are posing a question why should a non-filing taxpayer not require to have a TIN when by definition he is also a taxpayer.

“We don’t see any policy rational here,” he said.

“In fact, what we are looking at is perhaps all individuals tax payers including non-filing taxpayers should be encouraged to apply for a TIN.

“Inline for this there should be a provision on all individuals employ both in private and public should have TIN number,” he said.

Forau said to encourage individuals to apply for a TIN, employ individuals doing casual work, temporarily or permanent without a TIN number should be higher PAY than if you have a TIN.

“Moreover, a TIN can be used as an ID for opening a bank account, register your sim card, it can also be used in other ID services,” he added.

Finally, Forau said the penalties under current legislation are not longer appropriate and deterrent enough.

“However, we think the proposed penalty for example $20,000 penalty units are not harsh enough to deter tax payers and even tax administrators that are not comply.

“So perhaps there need to relook at the penalties and increase from $50,000 to $100,000 units, that should give a deterrent to tax payers not going to other activities,” he added.

He said with the economy now slowing down and fiscal revenue under performing it is critically important that legislative measures are mobilised to reduce or better possible to stop all tax leakages.

“In line with this tax compliance team and revenue collecting agencies must be strengthened in terms of manpower and technical capacity,” he said.

Further to that, Forau said CBSI believe that timely ruling of taxpayers is also important to ensure business activities are not delayed and halted more unnecessary

He also encourages the Committee to fastrack the other two reforms, Consumption Tax and Income Tax so that tax reforms can come as package and implement simultaneous.

“We want to see consultation on Consumption Tax and Incomes done quickly and pass in Parliament this year and implement next year,” he added.