est. 2007

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Government Stealing From Public Officers

Sometime ago Government introduced a budgetary measure that required taxpayers to pay tax on fixed travelling and entertainment allowances. The Minister stated that the measure would be in force for eighteen months. Immediately, the tax was condemned as being unfair because the Minister of Finance failed to make or did not understand the distinction between…

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Caswell Franklyn, Head of Unity Workers Union

Sometime ago Government introduced a budgetary measure that required taxpayers to pay tax on fixed travelling and entertainment allowances. The Minister stated that the measure would be in force for eighteen months.

Immediately, the tax was condemned as being unfair because the Minister of Finance failed to make or did not understand the distinction between the two different types of fixed travelling allowances that is paid by government. One is a salary perk paid to senior officers as a means of avoiding taxes, while the other is a reimbursement for travelling that is actually done in the performance of duty that would have been fixed at a particular figure. The travelling allowance paid to Court Marshals, who serve and execute court process documents, falls into the latter category. In effect, Court Marshals use their personal vehicles to do their duty, and Government reimburses them some of the cost that they incur while doing their jobs. It is particularly shameful for Government as the employer to turn around and tax the reimbursement which was previously taxed.

That travesty was brought to Government’s attention, and the Minister of Finance was forced to point out that the measure was not intended for persons like Court Marshals and Postmen who receive fixed travelling allowances but have no option other than to travel to perform their duty. Eventually, the Minister went to Parliament and passed legislation to clarify that the travelling allowance that is paid to Marshals and other officers in similar circumstances is not taxable. Paragraph (d) of section 9 (1) of the Income tax Act was deleted and replaced with the following that exempted the payment of income tax from:

“(d) Amounts advanced or received in the income year to be used exclusively to cover the cost of travel in the performance of duties of an officer or an employee in respect of his office or his employment where that travel is away from the place of business of his employer or from different places.”

If that were not clear enough, a new subsection (1A) was inserted that says:

“(1A) For the avoidance of doubt, with respect to paragraph (d) of subsection (1), where an officer is entitled to be reimbursed for any amount of travel in the performance of the duties of his office or employment, that amount is not taxable.”

According to the amendment act, those provisions came into force with effect from income year 2011.

Despite the Minister’s emphatic statement and the passage of the relevant legislation, some public officers defy the law and continue to tax those allowances. When the matter of taxing the travelling allowance was drawn, by letter dated June 20, 2011, to the attention of the Permanent Secretary, Ministry of Finance and copied to the Minister, they replied by letter dated July 19, 2011:

“Please be advised that the matter is currently engaging the Ministry’s attention.”

At the date of writing this article (April 15, 2012) it would appear that the matter is still engaging their attention with no corrective measures being taken.

An old saying keeps springing to my mind: while the grass growing, the horse starving.

  1. robert ross Avatar
    robert ross

    A similar error had to be remedied in respect of the Occupational Pension Benefits Act in respect of the 25% lump sum payment. The Act omitted to say that that sum was not taxable. And then it was put around that where a lump sum was payable as part of a pension benefits scheme only 25% of it could now be paid and the rest had to be put into the purchase of an annuity. And then it was put around that that might be unfair and there was a promise to amend that….all of which entailed a mis-reading of the Act anyway. It created a power to be paid 25%, a power to purchase an annuity. Nothing in this regard was mandatory under the Act.
    For David – and all lifted from Canada.

  2. old onion bags Avatar
    old onion bags

    @ Caswell
    Eventually, the Minister went to Parliament and passed legislation to clarify that the travelling allowance that is paid to Marshals and other officers in similar circumstances is not taxable. Paragraph (d) of section 9 (1) of the Income tax Act was deleted and replaced
    *****************************************
    Perchance , If you were Mr.Sinckler…before speaking on the matter in Parliament (first time) introducing the bill…..would it not have make sense to have his lawyers FULLY RESEARCH, the matter..before…going before the Barbadian populace with yet another example of ‘bleeps and blunders’…..and save face from shame ?
    Similarly, on the matter of making company directors liable for debts (VAT cheques ) incurred by companies….the PM went to the public this time (with this one),only to retract and choose more carefully his wording……Dunno boy, dunno..call it what ever you like … green and lost chart.

  3. robert ross Avatar
    robert ross

    @ Old Onions

    Precisely my point about the OPB Act. I’m told that only actuaries looked at it.

  4. JUST ASKING Avatar
    JUST ASKING

    DONT you all know that Barbados is fast becoming a place where all sorts of people including public servants are doing as they like without accountability to any one and that many of the these persons are senior persons with degrees but no human feelings ????

  5. Caswell Franklyn Avatar
    Caswell Franklyn

    Old Onion Bags

    There was no need to check with lawyers. The language of the original section 9 of the Income Tax Act was so simple, all you needed is a comprehension level below that which is required for the Common Entrance Examination. If he had not attained that level, he could have checked with the Commissioner of Inland Revenue, who, by the way, was Frank Forde who spoke to the issue in last week’s Sunday Sun.

    Judge for yourself what section 9 (1) (d) stated before the amendment:
    9. (1) In calculating the assessable income of a person for an income year, the following amounts shall not be included, namely

    (d) allowances for
    (i) travelling expenses; or
    (ii) maintaining and operating a vehicle, to the extent that the allowances may reasonably be regarded as representing the cost to the person of travelling in the performance of the duties of an office or employment.

    How is that different from the section that replaced it: only semantics!

  6. old onion bags Avatar
    old onion bags

    @ Caswie
    It’s a shame to make those kinds of mistakes, but to understand that nobody’s doing it on purpose…….what the hell is this ‘Stroke’ City United ?
    What then are they thinking about when these matters comes up to the floor ? And don’t tell me food,perks and salaries…I may be incline to believe you.

    “Wise men speak because they have something to say; fools because they have to say something.” : Plato

  7. Caswell Franklyn Avatar
    Caswell Franklyn

    Old Onion bags

    The shame is not in making the mistakes: it comes from the fact when the mistakes are discovered, they do nothing to correct them or they then try to cover up the error. This amendment is a classic example of trying to cover up. They went to Parliament deleted a section of the Income Tax Act and then replaced it with essentially the same thing. It makes them look stupid. An apology would have sufficed.

  8. Brutus Avatar
    Brutus

    @Caswell,

    Are you saying that there is no difference between the old 9(1)(d)(i) and the old 9(1)(d)(ii)? One refers to allowances for travelling expenses and the other refers to allowances for maintaining and operating a vehicle.

    The amended wording uses different language.

  9. The Scout Avatar
    The Scout

    The DLP is known for its bleeps and blunders, remember the late David Thompson in his budget speech saying cellphones will be taxed, and also a tax on lotto winners? These two have only been, like many other utterances, just words. Fruendel Stuart followed by promising the BSTU he would have the principal of AX seperated, this is yet to happen and it don’t seem he have a ghost of a chance of doing it LEGALLY. Words and PROMISES has been the hallmark of this administration.

  10. Observing Avatar
    Observing

    Had to ask, but shouldn’t somebody in the chain of document preparation had the slightest inkling of what should be and then draw it to the attention of the PS or MoF? the fact that we seem to so often carry clear and straightforward “mistakes” to the highest institution of the land without anyone along the trail sounding an alarm is worrying.

  11. Prodigal Son Avatar
    Prodigal Son

    From what I understand, the PS’s are allowing the Ministers to make these gaffs as the Ministers think they know it all.

    Observing, that first budget that was presented by the dead king was done solely Darcy Boyce, he consulted with no man in the ministry. DT was all over the place in CLICO’s jet and DB had a free reign. That’s why stupid things like taxes on cellphones and lottery winnings were included which a competent PS would know that such taxes would be hard to collect.

  12. Mystified Avatar
    Mystified

    When it comes to matters of legislation the role of the CPC must be a part of the discussion. Experience will show that the drafters do not like to have their work criticised even when an officer is trying to point out deficiencies or inaccuracies. Attemps to do this will result in questions like, how many years did you go to law school and lear how to draft? So that is also part of the reason why legislation will often say something very different from what was intended.

  13. old onion bags Avatar
    old onion bags

    @ Mystified
    Attempts to do this will result in questions like, how many years did you go to law school and hear how to draft? So that is also part of the reason why
    legislation will often say something very different from what was intended.
    **********************************
    Yo boss..that aint no excuse….if that be so.. FIRE the drafters…This aint no Bugs n Daffy Looney Toons we are talking bout but the Law of Barbados that cud destroy lives by such maleficence.

  14. ac Avatar
    ac

    in MIA reply to the budget didn,t she make mention of a similar proposal indicating a fee of some sort on cell phones to pay for the availabilty of having more computers in schools

  15. Caswell Franklyn Avatar
    Caswell Franklyn

    I hope that I will not be shocking anyone when I say to you that Government might be deceiving taxpayers. When these interim taxes were introduced. I remember the Minister saying that they would be in place for 18 months. When the legislation was passed to give effect to the “interim” increases. I do not recall that the legislation reflected the intent to let the increases sunset in 18 months. I could be wrong and I am very willing and would be happy to be proven wrong.

  16. old onion bags Avatar
    old onion bags

    @ Caswell
    Only on the Brass Tacks today’s program….an insider info alluded to the fact that the IB offshore industry pulls out left a $400 Mil deficit in tax collections by they moving to more attractive tax free domiciles…18 months Caswell ?
    Not now ….every penny on count nowadays…every crab hole digging at..No not now even if that was intended….the search for Treasury collections on .
    Vehicle registrations increase ($400-$3500)were also to be revisited in 2 yrs said DT….a dream…so much so big rides moving bout illeg.

  17. David Avatar
    David

    @Caswell

    The government will be forced to address this matter because as you stated it was proposed to be an 18 month measure.

  18. Caswell Franklyn Avatar
    Caswell Franklyn

    Even though it was proposed to be for 18 months in the budget that is not reflected in the legislation that was passed as far as I am aware. From my limited understanding of these matters, it would appear that Government could just continue collecting the taxes without doing more. And you know Bajans would just lay down and take it like a ………or should I say, Government would just continue to screw us.

  19. David Avatar
    David

    @Caswell

    Was there a role for the Opposition? Did they point out the deficiency if it is as you suggest?

  20. Brutus Avatar
    Brutus

    If I recall correctly, the 18 months referred only to the increase in VAT, and this has been reflected in the legislation. Of course this is easily checked since the budget speeches and the draft legislation are all available online.

  21. tedd Avatar
    tedd

    A reduction in VAT back to 15 % would reduce government revenues and be of no benifit to the consumer. The merchant would not change the price and the 2.5% would be extra profit. Let us remember Owen’s many tax reductions that did not result in price reductions, cars under 1000 cc and floresent bulbs. The same will occur again.

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