Proposed surcharge for late sunmission of income tax returns

1240/5(1943)

QUESTION TO BE ASKED OF THE PRESIDENT OF THE FINANCE AND ECONOMICS COMMITTEE ON TUESDAY 9th SEPTEMBER 2003, BY DEPUTY P.N. TROY OF ST. BRELADE

Question

In the report accompanying an amendment presented to the States on 24th June 2003, by the Committee regarding user pays charges, reference was made to a proposed surcharge for the late submission of income tax returns.

Would the President inform members –

( a ) w h e ther the Committee intends to introduce a surcharge for late submission of income tax returns

and, if so –

(i ) d es c ribe the criteria that will apply to such a charge;

(i i)   p ro v ide an estimate of the amount to be raised by such a charge;

(i ii ) p ro v ide an estimate of the costs involved in collecting such a charge?

( b ) w h e ther consultation has taken place with accountants or tax advisors and, provide any conclusions

drawn from this process, and give details of any objections raised in this regard by professionals during the consultation exercise?

Answer

1. I can confirm that, subject to the approval of this Assembly,theCommittee will introduce a penalty forlate delivery ofcompletedincome tax returns with effect from theyearof assessment 2003. I should perhaps mention that sanctions already exist within the IncomeTax (Jersey) Law, and aresetout within current tax returns, whereby a penalty may already beimposedfor failure tosubmit a tax return.

( i) The criteria that is proposed will apply, is as follows –

a ta x p ayer who delivers his completed income tax return after 6.00 p.m. on the last Friday of May

following the year of assessment will be subject to a penalty of £200;

if t h e t axpayer is not liable to tax, he will not be liable to the penalty. If the taxpayer has a tax bill of less

than £200, the penalty will be the amount of the tax due, and any overpayment will normally be recoverable;

a n a p peal can be made against the imposition of the penalty to an independent tax tribunal, the

Commissioners of Appeal, on the grounds that the completed income tax return was delivered late because of death, serious illness or similar exceptional circumstance;

th o s e t axpayers who employ a tax agent to act of their behalf will have to submit their completed income

tax returns by 6.00 p.m. on the last Friday in July following the year of assessment, this extension being necessary because tax agents would not be able to handle the workload that would be imposed on them if all their clients completed income tax returns had to be submitted by the end of May.

( i i) The amount that will be raised by the penalty is dependent on the number of taxpayers who fail to deliver their completed income tax returns by the due date. For example, if 2,500 of the 51,500 personal taxpayers on the Comptroller's current database fail to deliver their completed income tax returns on

time, the yield will approach £500,000. On the other hand, if 7,500 fail to deliver on time, the yield will approach £1.5 million. (The yield will drop slightly if some of those taxpayers have liabilities of less

than £200). Currently, some 14,000 personal taxpayers fail to submit their completed income tax returns by the

end of May, causing considerable additional work for the staff at the Income Tax Office because of the necessity to raise estimated tax assessments during the assessing cycle and the necessity to subsequently revise these assessments, sometimes on two or three occasions, when the income tax returns and additional information to support the income tax return is actually delivered. Some taxpayers do not submit their completed income tax returns until after the issue of the tax assessment in September, thereby causing even more work at the Income Tax Office because of the filing of an appeal.

( i ii) The estimated set up costs for the first year include computer development costs of £60,000 and

additional staff costs of £32,000, making a total of £92,000. The costs for the second and subsequent years are estimated to be £32,000 per annum. The staff costs do not relate to additional permanent members of staff at the Income Tax Office. They are extensions to existing contract posts to assist with the anticipated workload arising from the due date being imposed upon taxpayers. It is possible that with tax returns being submitted in a more timely fashion, the number of staff employed could be reduced, with a resulting decrease in costs.

2. C o nsiderableconsultation has taken place with both the Jersey Taxation Society and the Jersey Society for Chartered and Certified Accountants.Correspondence has alsobeen received from individualaccountancy firms and othertaxpayeragentswho have been madeawareof these proposals.

A  s a result of comments from these bodies, which my Committee appreciate, the original proposals have been

amended. The proposals which my Committee intend to lodge in November 2003, in time for the 2004 Budget debate in December2003, have taken on board these concerns and resulted in modifications which are now more acceptable to those professional bodies.

 M  embers will have the opportunity to comment on these proposals when our proposition is debated in

December 2003.