A safe forecast is that the brand-new GST will not be collected or paid by most businesses. The present property tax law is not enforced. We pay less than 40% of the property tax we owe. No one is prosecuted for non-payment of property tax. If they do not enforce the old tax laws, why should we expect them to enforce the new ones? It would make more sense to forget GST and increase the taxes that are easy to collect.
I have no private, inside knowledge of the reasons why the government of Anguilla has proceeded at this time to have the House of Assembly enact the GST in the face of massive public opposition to it. But they told us that the Caribbean Development Bank agreed to make an EC$20 million loan if they enacted the GST law by a certain deadline.
The World Trade Organisation rules, which we in the Caribbean are struggling to comply with, are that we should encourage free trade, get rid of customs duties, and, presumably, replace them with GST. Customs duties are said to be a hindrance to international trade and objectionable in principle.
By abolishing customs duties in Anguilla, there will be a busload of customs officers freed up for employment as GST enforcers. These officers can be retrained to go into supermarkets, hardware stores, lawyers’ chambers, accountants’ offices, hotels, luxury villas, and other applicable businesses, to conduct investigations into their income to determine whether they are collecting and paying the correct amount of GST. A great deal of re-training will be necessary. While we are at it, we can retrain them to enforce all the other taxing Acts that we presently largely ignore. If the Assembly does not abolish customs duties, there will be no staff to enforce GST. But the truth is no Anguilla government is voluntarily going to send home public servants.
The Interim Stabilisation Levy may be considered the most abusive tax in Anguilla. It amounts to an income tax of 3% on workers’ salaries and the incomes of self-employed persons above EC$2,000.00 per month, with a cut-off at EC$12,000.00. It is not a tax on income generally but is a tax on small pay cheques. That means that it is a tax paid mainly by persons of limited means (with the employer being made to match the payment).
If a real GST replaced the Levy, then the average employer would probably pay more tax than his or her employee would, which is only equitable. The Levy should be abolished at the earliest opportunity. It should not be kept for the Health Fund, as that will only be raided whenever government gets strapped for cash. Like the Social Security Fund is.
It has long ago been explained why direct taxes cannot work in Anguilla. First, most workers in Anguilla are public servants. Or it was so the last time I checked. The creation of a huge Inland Revenue Department (IRD) that will be necessary to collect income tax and investigate and prosecute offenders will be absurd. We will employ dozens of new public servants to collect income tax mainly from themselves. We cannot afford the present public service. We should be reducing numbers, not increasing them.
Second, few persons would pay the true amount of tax that is due. There will be a great deal of cheating. It will surprise us how many supermarkets and hardware stores will suddenly admit to earning less than EC$300,000.00 a year, the minimum for the Act to apply.
The IRD employs no person charged with enforcing the tax laws of Anguilla by bringing a prosecution. The police force has no officer trained in investigating tax crimes. The Attorney-General’s Chambers employs no Crown Counsel with any experience in prosecuting tax offences.
The complex enforcement provisions in the GST Act are a joke. In addition to there being no trained personnel to perform this function, the political will to prosecute does not exist. Any civil servant taking steps to enforce the Act will immediately be transferred to the Ministry of Infrastructure and given the Sisyphean job of counting nails and screws.
The reason for this non-enforcement of tax laws, as every Anguillian will recall, was long ago explained by the then Chief Minister, “We cannot turn innocent Anguillians into convicted criminals!”
It is for these reasons that Anguillian taxes can be described as virtually voluntary taxes. Only those persons who feel conscience-bound to pay taxes generally pay them voluntarily. Everyone else ignores them.
The one minimal enforcement mechanism is the rule in the Land Registry that you cannot file a land document such as a land Transfer or a mortgage Charge unless you first produce a Certificate of Good Standing from the IRD shewing your taxes are paid up to date. If you don’t want to pay your property tax, and wish to avoid all adverse consequences, the solution is to not file any land document in the Registry. That is not a satisfactory substitute for enforcing the revenue laws of Anguilla.
Third, since many Anguillians are past masters at avoiding paying taxes and levies, the tax burden will fall heaviest on persons of limited means whose main income is a pay cheque. The result is that in future, most employment will be paid for in cash with no records kept.
Fourth, and most importantly, the worker population in Anguilla is tiny, a mere couple of thousand persons. The establishment of the large and complex income tax bureaucracy necessary to enforce the collection of taxes efficiently and fairly from every person in Anguilla will be a disproportionate burden on the few taxpayers. My guess is that no enforcers will be either appointed or trained.
We are told that the only fair tax is the GST, which will supposedly be a tax on all applicable services purchased and goods sold. GST will be fairer than either the Levy or customs duties because it will be paid by all persons in Anguilla, whether rich or poor. Those who consume more will pay more. It is their choice. However, on past evidence the GST will be evaded by most businesses.
A fair and efficient system of GST depends on every qualifying business and service being computerised and keeping records and accounts. Small businesses have never kept, and will never keep, accurate accounts. Due to the historical absence of direct taxes, very few Anguillian trades, business, professions, and occupations keep accounts. The result, we can be sure, will be that only those few transactions that are not feasible without a paper trail will attract GST.
I forecast that on the day before the implementation of GST, most commercial activity in Anguilla will go underground. Invoices will cease to be issued. Receipts will not be offered. [On a personal note, I was recently refused a receipt when I paid for an item in a shop with a wink and the words, “Don’t you know GST is coming?”]
Soon, many commercial transactions that are presently carried out by credit card will be replaced by cash transactions. And many transactions that are presently conducted in cash will be replaced by barter or similar untraceable methods, all to avoid GST.
If there is no intention to replace customs duties by GST, but to keep them both, then as previously explained, there will be little or no revenue from GST. My recommendation would be to increase the present tariff on motor vehicles, spare parts, building supplies, alcoholic beverages, tobacco, perfumes, jewellery, watches, computers, other electronics, and all other non-essential items to, say, 150% of CIF. The blow could be softened by removing all duties from common groceries. Collection of these increased duties will not add any administrative costs. The infrastructure is already in place. That measure alone should bring in enough additional revenue to cover public servants’ salaries. They, at least, will be happy.
