On Monday 19th July 2021, representatives of the Antigua and Barbuda Chamber of Commerce (Chamber)vmet with officials of the Inland Revenue Department (IRD): Ralph Warner – Commissioner; Jermain Jarvis – Deputy Commissioner; and Craig O’Marde – Deputy Commissioner, to address some concerns aired by some Chamber members.
The Chamber was represented by Dr Errol Samuel – Quality Consultant and President, Profiles Consulting Inc; Bertram Alaxander – Consultant/Founder AccruServe Financial Solutions; Yves Ephraim – Managing Director, Pegasus Technologies Inc.; Mrs. Marsha Prince – Tax Manager, Grant Thornton; and Martin Cave – Executive Director of the Chamber.
The matter under discussion was the way that the policy of the IRD’s application of Section 11(i) of the Income Tax Act Cap 212 calculated, and made allowable deductions for salaries, and other emoluments due to “Related Parties” in other words, owners, directors, or persons related to beneficial owners of companies who are in the employment of the businesses concerned.
According to the “Interpretation, Ruling, and Opinions Inland Revenue Department, 1 of 2018” issued January 2019, by the Commissioner of the IRD, Mr. Ralph Warner. The above cited document sought to curb potential abuses which might be attempted by Related Parties or “The Group”, by inflating salaries, other emoluments, and benefits to minimize their tax liability. Consequently, the IRD issued a policy document to quantify what percentage of those emoluments would be allowable tax deductions, or how much of salaries and or benefits would be tax free; as well as to seek to plug any gaps left bare by
the 30th June 2016, abolition of Personal Income Tax, and Pay As You Earn (PAYE).
The primary concern tabled by the Chamber was that in the cases where family-owned incorporated businesses were being run/operated by members of that family, they (the Related Parties or The Group) were not being adequately compensated from their businesses without their income being heavily taxed, given that the amount allowed as non-taxable income was 25% of net income or profits.
The case was made by the Chamber that non-related senior level employees within a company could potentially earn a salary package comparable to that of the employed beneficial owner/or Related Party, without having made any investment of capital; time; risk; or any similar inputs.
The IRD advised that much work had been put into the law, and in its interpretation, and while there might seem to be cases where such disparities may arise, the purpose was not to seek to penalize the compliant, but to ensure that the would-be abusers should not escape, and consequently, cases where the purpose was inconsistent with the spirit of the law, those would be considered individually.
The IRD also advised that even though there was an appearance of disparate treatment, that the law was being evenly applied. In fact, it was mooted that given that Related Parties or The Group was able to claim 25% of the profits as non-taxable income, this should serve as an incentive for the businesses to bemore profitable so that the Related Parties, or The Group could earn more.
In the Chamber’s view this does indeed serve larger companies well, however incorporated SMEs would not receive the same benefits, given likely smaller profits. And in the case of Unincorporated Businesses, which is where most SMEs would fall, any annual income above $42,000.00 was subject to a minimum of 8% Income Tax.
The result of the meeting was that the Chamber would seek to ensure that its members would continue to be compliant where their tax status was concerned in accordance with the laws, rules, and regulations, and fair policies. The IRD agreed that the law would always be applied evenly across the board, and would work in conjunction the Chamber to bring continual awareness of issues within the private business, so that they both could collaborate on solutions.
Both acknowledged that each had a responsibility to ensure the continued economic growth of the country, and that while the IRD sought to carry out the mandate of the Government of Antigua and Barbuda’s Ministry of Finance in tax administration and collection; the Chamber had a responsibility to its members to seek to ensure that the business environment was a fair one, in which businesses could thrive, and the costs of doing business was contained.
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