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.
When you are in business paying taxes is very much a part of the enterprise. However there are some obligations which you may have a tendency to forget:
If you own an international business company please remember that the annual return must be filed by December 31, 2016
If you are an International Business service provider you must renew your licence by the same date.
If you have a domestic (ordinary) company of any kind please remember that there is now an annual return to be filed with a penalty of $10.00 per day. There are some who might not have met this obligation in 2016. If so penalties would be accumulating so this needs to be addressed immediately.
Penalties are now being enforced for failure to notify the corporate registry of any fundamental changes to the company.
All those involved in certain businesses and professions such as lawyers, real estate agents and hairdressers must apply for a renewal of their licence by the end of January 2017.
For those who are members of non-profit companies please remember that the requirement to file financial statements will now be enforced.
Know Your Customer procedures for gate keepers are also being enforced. Gate keepers are not simply financial institutions but includes lawyers, accountants and real estate agents amongt others. Broadly speaking one must be conscious of ensuring that one is not a part of a larger money laundering, financial crime or terrorist scheme.
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.
The recent decision by Government to ban the importation of Unmanned Aerial Vehicles (UAVs) for one year conjures up in one’s mind book burning and slavery.
At the same time one reflects on Government’s very strident calls for Barbadians to be risk takers and entrepreneurs. Much to its credit Government recently passed the Cultural Industries Development Act and has also facilitated a programme in human resources development for which film and video has been a significant beneficiary.
And so we find ourselves in a perpetual conundrum where our ambitions of wealth creation are thwarted by our puritan passion for regulation.
Those in the trenches of entrepreneurial endeavor might become overwhelmed by Barbados’ painful and desperate struggle to keep pace with its competitors while embracing an irrational fear that the majority of the population if given too much freedom will cause untold harm and bring calamity upon the nation.
There is no doubt that the establishment often has a difficulty in dealing with new technologies and harbor notions of all manner of evil which might attend if new technologies were to run rampant amongst the people. The fear, which caused the burning of books throughout history, is still manifestly with us.
Regulating Commerce – How much is too much?
Barbados has a long sad and unresolved history with the regulation of commerce, for Barbados’ modern economy was based on a sugar industry, facilitated by legislation, which made unpaid labour lawful.
While Barbadians shy away from examining their history, sensible people do so to avoid making the mistakes of their ancestors and indeed to learn from them.
The reliance on unpaid labour came to an end, not because it was considered wrong but primarily because it no longer made commercial sense to the British.
While the British Parliament was eager to bring an end to this abrogation of human rights the Barbados Parliament thought it made more commercial sense to insist on reparations for the end of chattel slavery and to implement a tenantry system in a country where they owned substantially all of the land. The call by the British Parliament to make land available to the newly emancipated people fell on deaf ears.
In the 1900s small business people suffered from over regulation under the Hawkers’ Registration Act. Apart from the annual registration, the payment of a fee and the presentation of a certificate of good character they were also restricted in how they could ply their trade. This regime was inapplicable to companies including foreign companies and plantations. It was deemed to be unlawful to sell in any “road, street, lane or alley “, a situation which limited the number of sites from which they could act as vendors.
The entrepreneurs of the time succeeded in their pursuit of wealth in spite of Parliament even though they were often relegated to the ownership of rab land – the land for which the powerful had no use.
More recently In the 2000s it was felt that new government policies precipitated the demise of the re-conditioned car business, which had seen a number of new entrepreneurs enter the market. It was through access to the Internet that Barbadians realised that they could buy better quality and cheaper cars on line.
Yes, there were questions of under-invoicing but remarkably the solution was to kill that industry – for Barbadians remain fervent about the death penalty. The reconditioned car business now remains largely amongst the few traditional car dealers in Barbados.
Those entrepreneurs died.
Our history demonstrates that the regulation of commerce is one of the most effective means of determining which class of people will have access to the wealth in a country.
And arguably legislation is one of the most powerful protectionist tools there is at the disposal of modern governments.
The issue to be addressed in 2016 is whether the regulation of UAVs will follow the same path of many other regulatory initiatives in Barbados where the early entrants who might have greater access to capital are protected by the Barbados Parliament or Cabinet in limiting the number of individuals who can actually participate in the market.
Inefficiencies and Corruption
Our undocumented history also shows how overregulation and inefficiency breeds corruption. The truth is that when systems function well little thought is given to offering a bribe. In some sectors the restraint of trade through overregulation has caused the bribery of government officials in order to access licenses and permits to become intrinsic to the sector.
This state of affairs has also created a high price for such permits and licences – the proceeds of which never find their way into Government coffers. Many of us fail to note in discussing the prosperity of those countries high in human or economic development that those countries also managed to minimise corruption. Corruption and small fledgling economies like that of Barbados do not go hand in hand.
Which historical path will we choose to create?
Benchmarking Domestic Regulation
When Barbados participated in the negotiation of Protocol II to the Treaty of Chaguaramas, the Free Trade Area of the Americas and the World Trade Organisation domestic regulation was always one of the most controversial issues on the agenda. Domestic regulation was the last barrier to free trade and the last protectionist tool in the armour of countries.
Thus Article VI of the General Agreement on Trade in Services at paragraph 4 while recognising the importance of regulating certain industries, also sets our criteria for determining whether regulation is reasonable:
The regulations must be based on objective and transparent criteria, such as competence and the ability to supply the service.
They should not be any more burdensome than necessary to ensure the quality of the service.
In the case of licensing procedures those procedures should not in themselves be a restriction on the supply of the service.
These principles are instructive and it is recommended that our policy formulation with respect to UAVs should take them into account.
Regional and international trade raises the question as to how foreign business people will be treated when they wish to bring UAVs into Barbados for their film and commercial shoots. Will they be allowed entry?
Barbados’ dependence on foreign investment has in some instances caused it to neglect the efficient workings of its bureaucracy. Foreign investors are often allowed to side step regulatory restrictions.
This was always a short-sighted and embarrassing approach taken by our Governments.
That approach was never going to work and this is now evidenced by Barbados’ extremely low ranking as a country in which to do business. Governments must do the hard work and make Barbados efficient for those who live in Barbados and investors will benefit automatically.
The newly emancipated people of Barbados were always viewed with suspicion in their efforts to engage in commerce. In setting up their wholesale and retail businesses they were often suspected to be fronts for trading in stolen goods. Perhaps that lingering suspicion remains with us in the emerging UAV sector.
We can only hope that as a nation we do not argue for risk taking and at the same time implement oppressive regulation. We can only hope that we do not continue to smother and then revive entrepreneurship, only to smother it again – it is a most inhumane and brutal form of torture.