29 August, 2018, 9:50 am
FIJI’S nine straight years of economic growth have been guided by fair, transparent and competitive revenue policies that have brought taxes on companies to record lows, decreased personal income tax obligations, and lowered the tax burden on Fijian consumers.
Despite those unprecedented tax cuts, government revenue has increased because of stronger and more effective tax administration procedures that have given certainty and confidence to Fijian businesses and taxpayers.
Below are some of the legislative changes that were announced in the 2018/2019 National Budget.
Jurisdiction of Tax Tribunal
Prior to the 2018/2019 budget amendments, the Tribunal had powers to adjudicate on matters within its jurisdiction relating to disputes up to $50,000, and matters where the disputed amount exceeds $50,000 provided both parties consent to the tribunal’s jurisdiction.
Due to the growth of the Fijian economy, the $50,000 limit to the Tax Tribunal is becoming more and more irrelevant.
The trend towards transactions with ever increasing sums has subsequently led to tax disputes which deal with larger sums.
The effect of which is most matters that are listed before the tax tribunal are transferred to the tax court simply because the disputed sum exceeds $50,000.
To address this issue, the jurisdiction of the tax tribunal has been increased from $50,000 to $500,000.
This means that the tribunal now has powers to adjudicate on matters within its jurisdiction relating to disputes up to $500,000, and matters where the disputed amount exceeds $500,000 provided both parties consent to the tribunal’s jurisdiction.
Registration of taxpayer identification number
A taxpayer identification number is a unique identifier applicable for the purposes of facilitating business and transactions that has tax and customs exposures.
The use of a TIN eases FRCS to handle queries, trace correspondences and store information for each person that is registered for customs and tax purposes.
The national budget has brought clarity by tax identification number to taxpayer identification number to correctly denote that TIN identifies the taxpayer and not a particular tax type.
We have seen over past years that TIN is required for bank accounts, LTA, property transfers etc. This has greatly assisted FRCS tracking down many taxpayers not declaring their correct incomes for taxation or some people not paying taxes at all because they never registered for taxation.
Now this is totally unfair to those who are voluntarily paying right taxes or salary and wage earners like employees who get their taxes deducted at source form their pays.
So this initiative of mandatory TIN for every Fijian citizen or resident creates a level playing field and assist FRCS clamp down on tax evaders and tax frauds.
So, irrespective of whether one is liable or not liable for tax, one must have a TIN.
There is sufficient evidence that many people hide their incomes under different persons or different forms.
The TIN creates that vital linking ability to connect the missing links when it comes to fair and transparent taxation system.
Thus, every Fijian citizen or resident must register for a taxpayer identification number with FRCS, even though he or she may not be liable to pay any tax.
Now with the Parenthood Assistance Program, TIN is issued with birth certificates for the newborn as well.
At the same time, we do recognise that it may be impractical when it comes to registration of newborn citizens earlier than August 1, 2018, FRCS has allowed a 12-month grace period for newborn citizens must be registered for a TIN under section 38 of the Act.
Similarly, for non-residents who become residents, we have allowed a three months’ period for registration from the time they attain the residency status.
This also applies to family members of non-residents who attain residency status as well.
To create a deterrent effect and increase voluntary compliance, Sections 38 and 38A of the Tax Administration Act has been strengthen by creating a penalty for failure to register or notify the FRCS of any changes in taxpayer particulars for individuals and businesses alike.
Again the idea is if FRCS does not have updated or current information on taxpayers, administration for awareness, advisory services, tax notices, site visitations etc becomes a challenges.
This is a way to ensure that the taxpayers (individuals and business) records kept with FRCS are current and correct.
This also ensures that tax assessments are made in a comprehensive and holistic manner taking into account all relevant factors and considerations.
So for ease of FRCS service accessibility, this responsibility has been given to taxpayers through our MyInfo Portal accessible on FRCS website (www.frcs.org.fj).
FRCS is transitioning to a New Tax Information System (NTIS) from the current Fiji Tax Information System (FITS) and it is expected that NTIS would be rolled out and fully operational by the end of 2019.
This would allow a taxpayer to file its tax return directly onto the system electronically, thus Income Tax Act 2015 has been amended to facilitate so that returns are self-assessed by taxpayers.
Section 8 of the Act allows a taxpayer who has filed a self-assessment return to be treated as having made an assessment of the amount of tax payable for the tax period to which the return relates being that amount as set out in the return.
The self-assessed return filed by a taxpayer is treated as a notice of the assessment served by the CEO on the taxpayer on the date that the return was filed.
Self-assessed returns require a taxpayer to consider all the facts relating to their financial affairs, interpret and apply the law to those facts, and determine the amount of tax owing with an appropriate degree of finality.
Notwithstanding the above, the CEO retains the power to issue amended assessments in default of the taxpayer doing so and to make assessments following an investigation into the taxpayer’s affairs.
While FRCS has conducted prosecution on a number of matters over the years to ensure tax compliance, it has been noted that prosecution in a court of competent jurisdiction is not always the practical solution.
It has been time consuming and costly matter for taxpayers as well as FRCS.
Infringement notices are designed to provide a timely, cost-efficient enforcement outcome in relation to relatively minor contravention of the Act.
The idea once again as deterrent — we want voluntary compliance and taxpayers, businesses doing the right thing.
Neither the State should be deprived of the tax revenues nor the ordinary who pay the taxes but these are not duly remitted to FRCS.
VAT infringement notice was introduced in January 2016 to ensure that registered persons sell goods and services at a price which reflected the actual percentage VAT decrease from 15 per cent to 9 per cent.
Customs infringement notice was introduced in November 2015 to ensure that, in the event of a decrease in duty, an importer sells goods at a price which reflected the actual percentage of a decrease in duty in the sale price of the goods.
Observing the non-compliant behaviors of taxpayers, the 2018/2019 National Budget amendments provided for the issuance of infringement notices and the payment of fixed penalties for certain offences such as failure to file a tax return, charging a tax where tax is not applicable or charging tax when not registered to charge example VAT or STT or ECAL, use of false TIN, for excisable goods — manufacturing with license, for bonded warehouse breaches.
Our interest is not making money from infringements and not that we want taxpayers and traders to breach the law, we want to deter them from even thinking of doing the wrong thing.
We want voluntary compliance. We only need to bring this laws for deterrence measures for a behavior that is there in Fiji’s taxpayer population — the dishonesty and cheating the tax system or ordinary citizens in the name of taxation.
These cheats and frauds need to be dealt with severely to get the message right that FRCS will not tolerate abuse of the tax system.
The law also provides fairness that if a taxpayer is issued with an infringement notice, he or she may choose to pay the fixed fine, or if her or she is confident of no wrong doing, taxpayer may elect to dispute the matter in a court of competent jurisdiction.
Offence for charging tax where no tax is payable
There are instances where taxpayers have charged tax where no tax is payable or the tax charged is not correct.
The charged tax is not remitted to FRCS as there was no tax payable. The result of which means that the taxpayer benefits from representing to charge tax and the tax charged is retained by the taxpayer.
This is also applicable for other tax types such as ECAL (charging of plastic levy) or STT.
This is certainly a punishable act and the penalty for such an offence is a fine not exceeding $25,000 or to imprisonment for a term not exceeding 10 years or to both a fine and imprisonment.
Offence for failure to charge tax
On the other hand, there may be scenarios where a taxpayer who is supposed to charge tax fails to charge tax or does not charge the correct amount of tax.
For example, a taxpayer may register for VAT voluntarily in order to claim VAT inputs.
However, he or she does not impose VAT on the supply of his goods or services.
If a person is registered for VAT, he or she is required to charge VAT on the supply of his goods or services according to section 15 of the Value Added Tax Act 1991.
This leads to an unfair situation where a taxpayer has registered for VAT and enjoyed the benefits of being able to claim inputs but provides no corresponding outputs.
To address this issue, this act of the taxpayers has been made it as an offence and if a person fails to charge a tax in accordance with a relevant tax law or charges an amount of tax which is not in accordance with the relevant tax law.
The penalty here is again a maximum fine a fine not exceeding $25,000 or to imprisonment for a term not exceeding 10 years or to both a fine and imprisonment.
Offences by a tax agent
Taxpayers rely on tax agents for tax advice or preparation of tax returns, it is important that a degree of reasonable care or due diligence is used by tax agents.
Sometimes, tax agents either engage in giving wrong advice or devise schemes to evade taxes for taxpayers.
The 2018/2019 budget has increased their accountability and responsibility in terms of exercising professional care.
Tax agents should exercise a degree of professional care and skill, appropriate to the circumstances of the case.
It is also important that tax agents enquire further into the tax affairs of their clients and not purely rely on the information or documents provided by the clients (taxpayers).
Thus, we have seen the introduction of offences and penalties for tax agents who are non-compliant or make false or misleading statements.
The offence has been introduced to ensure that the tax agent’s exercise due diligence in preparation of tax returns, or any document required to be produced under any tax law.
The penalty for the offence is a fine not exceeding $50,000 or to imprisonment for a term not exceeding 10 years or to both a fine and imprisonment.
The Revenue and Customs is here to serve you better.
Taxpayers are urged to visit the nearest Revenue and Customs Office for clarification or assistance.
You may also email your queries on email@example.com