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Director General of Tax Administration, Clive Nicholas is warning company directors that in the event of tax deductions not being paid over to the government, the managing director, or another responsible person in the company, would be held accountable.
The Director General was speaking at a recent JIS Think Tank, where he highlighted the importance of companies meeting the March 15 deadline for filing annual income tax returns.
He noted that sometimes, companies made statutory deductions from employees’ pay packages and unknown to the workers, failed to pay over these deductions to the government.
“What they have done is to trick the worker.they have used those monies for their own purpose sometimes,” he chastised. “These funds are what they call trust funds. They [employers] are keeping those funds in trust for the government and the other agencies. If they find themselves having to use those funds, they are in breach of the trust,” he pointed out.
Mr. Nicholas explained that the Income Tax law required the appointment of what is termed a ‘responsible person’ (and) that responsible person must every month, ensure that taxes are paid over.
“If they (companies) don’t appoint a responsible person, the law goes on to say that the managing director or the person in charge is deemed to be the responsible person. So when the time comes, if you have to take action against them for those sums, then it is the responsible person or the managing director that we are looking to for those funds,” Mr. Nicholas stressed.
He also added that responsible persons were held liable for outstanding debt. Mr. Nicholas is also encouraging companies, which have not paid taxes for a number of years, not to shy away from the system, but to begin taking steps toward compliance, by filing returns for the year 2004.
With respect to non-compliance, he advised that under the law, the Tax Commissioner could demand six years return – dating back to 1999. “They don’t go back further than six years unless fraud is involved,” he pointed out.
“I am recommending that people who are in this situation [of non-compliance] at least start to file. I’m not saying that the other returns are not due and payable, but I’m saying, people sometimes are so fearful that they stay away.even those persons can start to file the 2004 returns,” he said.
He also informed, that under the law, it was possible for persons to be incarcerated for tax evasion and failure to pay tax arrears.
Turning to the matter of tax computation, the Director General explained that for example, if a business has sales of $1 million, with business expenses of $600,000, the net income is $400,000. The threshold of $120,432 must then be subtracted, leaving a taxable income of $279,568. At a tax rate of 25 per cent, the tax due is $69,892.
In the case where a company makes a loss, Mr. Nicholas said, the company must still file returns. “But you will file a return saying my net income is a loss of so much, my tax is zero,” he explained.
He stressed that it was important even while making a loss, to file returns outlining the financial situation of the company, otherwise the Commissioner of the Taxpayer Audit and Assessment Department (TAAD) might raise an estimated assessment, having not seen or heard from the company.
“Then. you have the problem of having to object and explain to them why you hadn’t filed and you may very well incur certain penalties. so my advice. is to file those tax returns,” the Director General stressed.

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