The inexplicable hardship in claiming tax refunds

IN THE Peanut comic strip, Charlie Brown declares he wants to become a doctor. Sally Brown: “You cannot be a doctor as you do not love mankind.”

Charlie Brown: “I love mankind; it’s people I can’t stand.”

This remark is relevant and germane to tax filing and claiming of tax refunds.

On a number of occasions, I have heard taxpayers express the view that they have no problem filing tax returns; it is Tax Administration Jamaica’s (TAJ) stance on refund claims that they dislike. Some avoid it totally.

Only recently, a client declined to claim a tax refund. When asked why, he gave a lot of hard-to-understand reasons, but finally remarked: “Give to the Government what is due to them and what is due to me, let them keep it.”

There seems to be a well-established view that the claiming of a tax refund gets taxpayers into a tangled and dangerous web with the TAJ. Here are some of the experiences. Company A revised its tax returns for 2014 and 2015. For 2014, it claimed a refund while for 2015, it declared an additional tax. The 2014 tax return was put in a failed pool – in abeyance – while interest and penalties were calculated on 2015 and the company received a demand notice.

John claimed a tax refund and was contacted by the TAJ two years thereafter. Additional information was requested and sent. Another long period passed and he was again contacted by a different agent asking for the same information. He complained to the officer who assured him that she was blameless, and skilfully absolved the TAJ, while pointing out that this was now an opportunity to resolve the matter.

“Yes, it’s about time – at least she sounded sincere,” John said. She promised to get back to him, which never happened. His financial dream perhaps placed on the list of forgotten, condemned files.

Why would a bona fide claim for a refund be so disheartening? One person commented that claiming a tax refund is almost blasphemy, the retribution for which is sometimes a tax audit. TAJ’s position seems to be that refund claimers are persons who are broke and trying to score a monetary reward.

Consider the experience of Jay, a pensioner. After leaving high school, he went to work for 33 years with the Income Tax Department. He is the last of the stalwarts who negotiated the double taxation treaties in the 1970s. Jay, who for decades gave sterling service to the very tax system, applied for a tax refund. TAJ refused to grant it. Jay, now 93, may never get back a penny of the overpaid tax due to him under the law.

The question which has to be asked is, why would the TAJ take this attitude towards refunds in the first place?

The TAJ will say they are processing and applying the law, which is their sole purpose. Perhaps it is true that some taxpayers are not due these refunds as they may, perhaps, have applied the law improperly or unwittingly reduced their income. A semblance of tax evasion, perhaps.

But the TAJ’s tactics are morally unjustifiable.

As a general appreciation of what is and what is not fair to the taxpaying public, the TAJ perhaps should not let the ‘good suffer with the bad’, and grant a refund to everyone who claims it – the just as well as the unjust. Then, if warranted, investigate each case on its merit.

This is to embrace the maxim from Blackstone, which seems to form the cornerstone of the American Justice system, that ‘better that 10 guilty men go free than to convict a single innocent man’.

It is based on the premise that the wrongful conviction of a single innocent person is worse than the guilty going unpunished.

Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston. everald.dewar@bdo.com.jm