I always believe that ultimately, if people are paying attention, then we get good government and good leadership. And when we get lazy, as a democracy and civically start taking shortcuts, then it results in bad government and politics. – Barack Obama
The Barbados Act gives the State the ability to impose new taxes without the Citizen having the opportunity to vet those taxes
The Provisional Collection of Taxes Act (PCTA) Cap 85 of the Laws of Barbados gives the Minister of Finance through the Parliamentary process the power to make and have resolutions passed allowing taxes to be collected without the relevant tax legislation having been enacted.
The Commencement date for this Act is June 30th 1967.
The Act is very short and contains the following features:
- The Act covers existing taxes as well as new taxes.
- Once contained in the approved budgetary proposals of the Minister of Finance, they have effect on the date announced by the Minister as if the appropriate legislation had been enacted.
- The legislation has to be implemented within four months of the date of the proposals made by the Minister of Finance in the House of Assembly.
- Where the legislation is not introduced and passed within the required time frame any taxes paid under that legislation are to be refunded.
The UK Act is fundamentally different from the Barbados Act
The purpose of this mechanism seems to be to allow the State to continue to collect taxes until the bill authorising such collection has been passed into law. The legislation was adapted from similar UK legislation. The reasoning behind this Act in the UK was that income tax and corporation tax were considered to be annual taxes, and could not be collected without the passage of a Finance Bill which would always take some time before the Royal Assent was given. In the interim the State could continue to collect taxes.
The UK replaced its 1913 Act with new legislation in 1968. The UK PCTA of 1968 is somewhat different from the Barbados legislation in the following material respects:
- It provides for the renewal for a further period of taxes already in force, whether at the same or different rate and with or without modification.
- The resolution must have a statement that it is expedient in the public interest to begin immediate collection of taxes without the enactment of the relevant legislation.
- It does not apply to the imposition of new taxes.
The PCTA as a Mechanism for the Imposition of New Taxes is completely inappropriate
The PCTA would work well in the circumstances outlined in the UK Act. The taxes and their collection would have been in effect for the past year at least and the PCTA would permit the seamless collection of taxes with no disruption of the activities of the taxpayer and the taxpayer would have had the opportunity to review the legislation previously. The mechanism would also work well for a change in tax rates.
It is submitted however that the mechanism does not work well for the imposition of new taxes.
In Barbados the further practice has developed that in circumstances where the legislation has not been enacted within the stipulated period of four months an Act validating the collection of the taxes without the appropriate legislation can be enacted.
The National Social Responsibility Levy is a new tax which should never have been imposed without the provision of legislation available for Scrutiny.
According to the Summary to the Budgetary Proposals of 2016 which appear as an Appendix thereto, a National Social Responsibility Levy (NSRL) was to be introduced from September 1, 2016. The Levy was to be introduced at a rate of 2% on all imports. The levy would also be applied to goods manufactured in Barbados in order to avoid breach of World Trade Organisation rules against imposing discriminatory levies on imports. There would be no imposition of the levy on goods imported to be used in local manufacturing in order to avoid a double imposition of the levy.
The Budgetary proposals of the Minister of Finance were delivered in the House of Assembly on August 16, 2016. The practice direction from the Barbados Revenue Authority was issued on August 30, 2016. Despite the practice direction there was still a great deal of uncertainty as to the mechanism for the imposition of the tax.
It is submitted that this was insufficient time to put into operation a new tax. There is no obligation by the Minister of Finance to use the PCTA even though available as a legislative tool. Far less disruption would have occurred had the practice of consultation and running models for the imposition and collection of taxes been engaged.
The Constitution allows the State to tax its Citizens but does not give the State the right to circumvent the legal fetters meant to protect the Citizen.
Let us start at the beginning. Money can be considered property and Section 16 of the Constitution of Barbados does protect Barbadians from the deprivation of property “ except by or under the authority of a written law”. Within that very section there is a carve out for taxation where the act of deprivation is “ in satisfaction of any tax, duty, rate, cess or other post”. Nevertheless despite this carve out one could argue that exceptions to fundamental freedoms should be construed as narrowly as possible in order to avoid the creeping erosion of such rights.
Dr. Francis Alexis in his treatise Changing Caribbean Constitutions states:
Where the limitation of a right is allowed by the Constitution, what is done must have a legitimate aim or objective regarding the permitted limitation. The measure provided for by the law must be proportionate to that aim, the law must not be disproportionate, overbroad, excessive or too wide. There must be proportionality between the measure applied and the mischief being cured.
In support of this position he quotes Lord Diplock in Ryan v. A-G (1980) A.C 718 at 718E.
In the case of the NSRL the State is seeking to impose a new tax which prima facie would be in breach of the fundamental rights of Citizens in the circumstances where there is no written law. Is the PCTA the written law to which the Constitution refers? Arguably it is not, since it is not a substantive Act itself which contains any charging provisions by which a tax could be levied and more worrisome any safeguard provisions for disputing the levying of such taxes.
Even if one were to accept that the PCTA could be used for the imposition of new taxes that piece of legislation includes a fetter in favour of the Citizen in that it gives the State four months to put its house in order. In many instances the State side steps that fetter in favour of passing a validation act in order to cure the breach. The purpose of legislation in taxation is to ensure that there is certainty and that the provisions of the law do not encroach upon the fundamental rights of the Citizen more than is necessary. It is submitted, that to then take the next step of validating such legislation erodes another mechanism to check the encroachment of the State on the rights of the Citizens.
If one were to embrace the argument of Dr. Francis Alexis one must look to the mischief which the State seeks to cure and determine its legitimacy. One can only guess that the State is seeking to avoid the process of implementing a new tax through the process of writing a policy paper, consulting with stakeholders and passing the resulting legislation through Parliament and the Governor-General. Is the ultimate mischief that the process is too time consuming? The Constitution is after all according to Section 1 of the Constitution the supreme law and one should tread cautiously when dealing with provisions which might facilitate a breach of the Constitution. And the limitations to such rights and freedoms allowed by the State are according to section 11 of the said Constitution in existence to ensure that all Citizens enjoy them or are in the public interest, not to facilitate the State ignoring legal fetters in exchange for the quick collection of taxes.
The Constitution, fundamental rights and freedoms, tax legislation and short cuts do not go hand in hand.
It is unconscionable that the PCTA should be used to impose new taxes on Citizens and should be halted.
It would seem that the PC TA has strayed from its origins which was to allow the State to continue to collect existing taxes until it had a fresh mandate to do so under legislation. The PCTA raises too many Constitutional and moral issues in seeking to impose new taxes through this mechanism. The current approach of the State results in the State engaging in activities which do deprive the Citizen of property but without the necessary scrutiny. The substance of the legislation is not circulated in the Gazette in order to give adequate notice to the Citizens and nothing is laid in Parliament to be scrutinised by the representatives of the people before implementation. New taxes should not be imposed on Citizens without the most careful scrutiny.
This means that the Citizen can not determine the practical impact on him, his business or his household and more fundamentally whether it encroaches on any existing fundamental rights. The mad scramble to hold consultations and collect taxes within a matter of a few weeks may provide an adrenaline rush, however there can be no reason good enough to sail so close to the abrogation of the rights of Citizens. The imposition of new taxes through the PCTA should be put to an end and the PCTA amended in order to remove the ability to impose new taxes through this piece of legislation.
Lynette Eastmond
For some it has been a difficult year! As a new year approaches all business people must keep in mind their statutory obligations and seek to meet them.
Eastmond & Co. 