IRD’s Strategic changes, Risk Management Focus highlighted at SICCI Information Session
Members of the business community were given an update from the Inland Revenue Division (IRD) of the Ministry of Finance and Treasury and responses to questions and concerns relating to the administration of tax in the country.
This was during an Information Session hosted by the Solomon Islands Chamber of Commerce and Industry (SICCI) on Friday 31 July where IRD Commissioner, Mr Joseph Dokekana was the key presenter.
The Commissioner provided an update on IRD’s Strategic Themes and changes, Revenue and Risk Management Focus and also updated businesses on the Division’s COVID-19 Fiscal and Administrative incentives.
Mr Dokekana said their Strategic theme requires IRD to be customer focused, managing risks to improve compliance collection costs and continuously improve the organization and staff capability.
He said a number of changes are in place to support these strategic themes.
“IRD and the Ministry of Finance are committed to continue with tax reform and the first phase of the reforms continued with the Tax Administration Bill which is ready to go to Parliament,” the IRD Commissioner said.
It was also highlighted that a number of remedial legislative changes have been made for the last two years to ensure the tax revenue for Government is protected.
This includes withholding Tax regimes (Resident Professional Services, Resident management Services, NR Rental WHT), changes in Personal Income Tax Threshold ($15,080 to $30,080.00) and the embedment of a Legal and Policy unit within IRD to begin implementation on a legislative change programme and on time response to legal issues.
“Under this reform some of our services which we would want improved will become legislated which is good. There are a lot of risks that IRD have come across especially in terms of compliance and payment and that is normal for every tax administration.
“Compliance is one of the serious issues and it is important to note that some of the changes will reduce the cost of compliance,” Mr Dokekana said.
IRD is also looking at measures to build an effective relationship with businesses and the private sector who employ a large number of Solomon Islanders and invest millions of dollars in the local economy each year.
To do this, Mr Dokekana said IRD will continue to grow the e-tax filing and payment platform through the establishment of a comprehensive field strategy. The online tax system allows businesses and taxpayers to file returns for PAYE, Goods Tax and Sales Tax, and to pay those taxes through your internet banking.
“We will also utilize our newly Customer Service Training Centre which will serve all our customer needs and staff capacity building. A new Large Taxpayer Office (LTO) is now put in place to serve large taxpayers which will officially open soon,” he said.
He said IRD have developed a number of strategies that supports its compliance risk management governance document, targeting more specific industries.
“Risk management is one of the strategic focus for IRD, as such, currently we are developing seven compliance improvement strategies (CIS) which will soon be made public.
“The CIS will outline which industries, sectors or subject that we will be focusing on to improve compliance while some of the risks will be addressed through education,” Mr Dokekana said.
The IRD Commissioner also welcomes suggestions to partner with SICCI in providing trainings for businesses to enable them to better understand legislations and make it easy for businesses to comply.
He also took the opportunity to respond to questions and concerns raised by SICCI members during a questions and answers session.
To increase revenue collection, the Commissioner was asked what measures has the IRD taken to address the issue of businesses operating without proper registration and recording of transactions.
In response, the IRD Commissioner said: “Registration checks are conducted every year by our Audit Section. This involves physical observation on existing business operations, third party checks including the media, public and business spot checks for new businesses. The purpose is to identify changes within the business community and to see whether tax obligations are fully satisfied. A total of around 500 to a thousand taxpayers registered during the year. When VAT is introduced, we will require all VAT businesses to have a POS Point of Sale machine and software to link to IRD record system.”
VAT, Value-added tax, is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.
Businesses are also concerned that the tax refund process takes too long.
Mr Dokekana said IRD is required to conduct checks on the validity of refunds and these take time and sometimes they discover that whilst a taxpayer may have a credit on one tax type, they owe tax in another.
“Inland Revenue and Treasury will facilitate the refund of tax credits and implement offsetting of income tax credits against other tax debts. Normal strict vetting will be carried out before the refund is paid,” he said.
In terms of the much-anticipated Tax Administration Bill (TAB), the IRD Commissioner confirmed that it may not be tabled in Parliament until December later this year.
“The current parliamentary session will be short and will concentrate on the State of Emergency and COVID-19.
“Therefore, there is no hope of getting the bill through, so it has been withdrawn. The commitment is still there but we now anticipate the TAB will be considered by Parliament in December. In the meantime, we will get the regulations drafted,” Mr Dokekana said.
The long-term advocacy goals for SICCI from its membership, is addressing barriers to business growth in the country and one of them is reforms to our tax system including cost of doing business, as well as the effective implementation of our laws and regulations.
SICCI urges Government not to forget these enablers for private sector growth amidst the difficulties brought about by the COVID-19 global pandemic.
“Following up on tax affairs is a time-consuming activity because of the different requirements you have to meet for different types of taxes. Overall, the Bill (TAB) covers many important administration issues faced by businesses,” SICCI Advocacy Officer, John Ta’amora, said.
“A review of the current tax system that is comprehensive and holistic from the starting, will examine problems with the current system and seek solutions to deliver a tax system that will promote economic growth and one that is fair, simple and broad-based, which ensures everyone who is liable to pay tax, pays the correct amount,” he added.
SICCI has the goal that through its contributions, and that of other stakeholders, the country’s Tax System will be fair, simple enough to follow which enhances taxpayer compliance in the country.
“We encourage the Government to take a broader view of taxation. One that sees the importance of course in raising much-needed revenue, but one that does not stifle businesses and growth in the country,” Mr Ta’amora said.
Meanwhile, SICCI acknowledges the IRD Commissioner for seeing the importance of updating members of the business community on the work and reforms IRD is planning.
“I thank you all (businesses) for the contributions you make to the Government through services and fiscal money that keeps the country sustained,” IRD Commissioner, Mr Dokekana, concluded.
Tax administrative incentives for businesses
The Solomon Islands Government through the Inland Revenue Division (IRD) is looking at granting tax administrative incentives to businesses that are seriously affected by the COVID-19 global pandemic as part of its economic response plan.
IRD Commissioner, Mr Joseph Dokekana highlighted this during an Information Session on Friday 31 July hosted by the Solomon Islands Chamber of Commerce and Industry (SICCI) for its member businesses.
Mr Dokekana said the objective of this measure is to provide, on case by case basis, tax relief to taxpayers (businesses) facing serious financial hardship or experience cash flow issues due to COVID-19 on production of proof of actual hardship.
“This measure includes temporary deferment of tax payments, instalment arrangement, reducing instalment amount and extending instalment period,” he said.
He said only businesses in the tourism sector are entitled to a tax holiday effective for five years starting from the 2020 financial year.
“The Tax holiday incentives for tourism related businesses is provided in the Second Schedule Part I of the Income Tax Act and shall apply in full.
“The incentive includes an exemption from income tax on the income and profits accruing to any tourism investor operating tourist hotels of three hundred or more rooms, tourism resorts of fifty or more bedrooms; or other tourism-oriented projects including resorts,” the IRD Commissioner highlighted in his presentation to SICCI members.
In terms of provisional tax adjustment, Mr Dokekana said relief is available for businesses in other sectors where circumstances have changed due to COVID-19 and businesses are able to make an estimate or re-estimation of provisional tax for the second, third and fourth quarters of 2020.
“In applying businesses will need to provide details of downturn in sales for the last quarter and evidence of cash flow difficulties including three (3) months bank statement,” he said.
For goods tax and duty incentives, Mr Dokekana said normal exemption process application will be applied while a ministerial order will be made to exempt personal protective equipment from goods tax and duties like hand sanitizers, face masks and gloves.
He revealed that automated penalties arising from tax liabilities were switched off from January this year to 30 June 2020 while only manual penalties will be imposed for fraud and tax evasion.
The IRD Commissioner also informed businesses that the deadline for lodging of income tax returns for 2019 has been extended by three months to the end of June 2020 automatically for December lodgers.
“The due date for income tax payment is to be extended by one month to 31st October or by one month for non-December lodgers.
“For those who may want to have more than three months extension to lodge returns, they will have to apply to the Inland Revenue Division,” he said.
Mr Dokekana further highlighted that consideration will be given to reviewing the guidelines on case by case basis of the recovery measure to garnishing of wages, bank accounts and the seizure and selling of assets. These measures can have severe impacts on some taxpayers in the current circumstances.
Meanwhile, the IRD is putting some restrictions on payments released by the Treasury Division in relation to tax debt.
This restriction applies to those who have not paid their tax or have not responded to IRD despite receiving multiple debt notices. It is understood that this restriction also applies to those applying for the Government’s COVID-19 Economic Stimulus Package.
IRD concerned with businesses remitting money overseas
The country’s Inland Revenue Division (IRD) is concerned with the continuous practice of remitting money overseas by some businesses which causes a huge impact on Government revenue.
IRD Commissioner, Mr Joseph Dokekana revealed this at an Information Session hosted by the Solomon Islands Chamber of Commerce and Industry (SICCI) for its member businesses on Friday 31 July at the Heritage Park Hotel.
According to Mr Dokekana, IRD has conducted an audit and found that certain businesses (taxpayers) are remitting [sending] monies overseas without paying tax to the Solomon Islands Government.
The audit also found that returns and payments have not been lodged while some businesses are not registered.
Mr Dokekana said one that is of serious concern is the continual remitting of money overseas.
“Some are remitting money as purchases or family support in millions of dollars which are in fact deemed dividends and no withholding tax has been paid on them or they are salaries and no PAYE paid.
“Others are sending money supposedly to purchase goods but it was found the goods have never entered into the Solomon Islands,” the IRD Commissioner revealed.
Mr Dokekana said in one case, information showed that more than SBD20 million went out by Telegraphic Transfer (TT) to purchase goods but imports from this particular case were only SBD4 million.
“So, if you are aware of any of these practices, it is in the interest of all concerned to come forward now and make a voluntary disclosure to lessen any penalties that may be imposed,” he said.
According to the amount of tax assessed by the audit, revenue collected dropped by $115, 002, 655 in 2019 as compared to the previous year, 2018.
“We are carrying out an assessment on people who are doing these illegal activities and they are liable to huge penalties. From this assessment the IRD will be able to come up with ways to stop these activities that tax payers are engaged in,” Mr Dokekana said.
The IRD Commissioner was disinclined to reveal figures on how much exactly is the Government losing out on in terms of tax revenue due to this practice of remitting money overseas by certain businesses.
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