The practice of Tax Administration Jamaica (TAJ) is to prosecute taxpayers who have failed to file income tax returns whether or not the taxpayer honestly believed that his returns were filed. If you fail to file your income tax returns then you run the risk of being exposed to a fine of up to $2,000,000.00 or 2 years in prison. What if your failure to file was an accident? What if you simply did not know that the annual returns were not filed for a particular year? Does that make you automatically guilty of an offence and subject you to a fine or incarceration?
The Income Tax Act sets out the procedure that annual returns are to be filed on or before the 15th day of March for the year in question. In the same section is what lawyers call an offence-creating sub-section, where it says “any wilful failure to comply with the provisions of this section creates an offence”. Not all taxpayers have a duty to file income tax returns. Pay as you earn (PAYE) taxpayers are not required to file annual returns if their employer is deducting taxes and filing an employer’s return for them. It should be noted that even if you are unemployed, you are still expected to account for your tax returns. What of the self-employed taxpayers who do have that duty to file tax returns?
The TAJ should, at the very least, satisfy itself that the taxpayer’s failure to file was wilful before it commences any prosecution of the taxpayer. It ought not to be that the first time the taxpayer is being notified of the outstanding returns is by court summons to appear in Court to be prosecuted for failure to file returns.
Interestingly, the Income Tax Act did not always have the word ‘wilful’ in the provisions. The legislation was amended to include the word ‘wilful’. This amendment suggests that Parliament intended that those who were aware of the outstanding annual returns and did not file those returns should be prosecuted. The amendment was to protect those taxpayers who, for whatsoever reason other than wilful, failed to file annual returns to not suffer the pain of prosecution. In several decided cases and by its very definition, wilful requires intent or deliberateness of action on the part of the taxpayer. Wilful failure to file is a critical ingredient to any case mounted against a taxpayer and without it, the case is bound to fail.
What of the taxpayer who honestly believed his tax returns were filed and as soon as he is notified of the outstanding annual returns, files it? Should that taxpayer still be prosecuted? The answer from the TAJ seems to be yes. The TAJ’s position is once the taxpayer misses the March 15 date then that taxpayer is liable to be prosecuted. However, this would appear to be inconsistent with the case law that requires the prosecution to show intent.
An interesting trend has developed for citizens under the Queen’s peace to attend Tax Court and plead guilty to offences they may very well not be guilty of due to a misunderstanding of the law and in particular, how the charge is read to the taxpayer. Taxpayers may prefer to plead guilty from the outset and pay a reduced fine of
$200,000.00 rather than go to trial. They should bear in mind that these are criminal proceedings and one should not lightly plead guilty, without first seeking proper legal advice.
Failure to file annual returns by March 15 is not in and of itself an offence under the Income Tax Act. Wilful failure to comply with the provisions of the section, which states that annual returns are to be filed on or before March 15 of the year in question is what creates the offence. Understand your duties as a taxpayer.
Jahmar Clarke is an Associate at Myers, Fletcher & Gordon and is a member of the Litigation Department. He may be contacted at Jahmar.clarke@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.
