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File on time

by Sharon Austin

Over 30,000 taxpayers have already filed their income tax returns and those who have not are being encouraged to submit theirs before the Tuesday, April 30 deadline.

Customer Service Manager at the Inland Revenue Department, Neville Clarke, said that about 100,000 persons filed last year, including 16,000 who filed for Reverse Tax Credits.

“Approximately 85,000 taxpayers filed on time, of which 17,670 filed during the last week of April 2012,” he disclosed.

Clarke acknowledged that the introduction of the $500 penalty in 2011 seemed to have inspired persons to file on time.

“The penalty was introduced, not to put a burden on taxpayers, but to encourage people to file early and we can say that the majority of them respect tax laws and pay their taxes on time,” he insisted.

He warned that the filing of false returns “is tax evasion” and disclosed that persons could be fined 100 per cent of the due tax.

“We want to encourage those persons who file false returns to desist from doing so because when we find out, and we will find out, then the penalty will not be worth the benefit you would have received,” he cautioned.

During a wide-ranging interview, the Customer Service Manager stated that persons who did not have access to computers could use those at the public library. He disclosed that 90 per cent of the taxpayers filed online last year, while staff at the IRD had to manually key the other 10 per cent.

To file online, persons should visit and those who need assistance or additional information should contact the Customer Service Department at 430-3222, 430-3223 or 430-3224.

As implied, income tax is a levy on all revenue from business, property, office or employment. It was first introduced in Barbados in 1921 and in 1957 a pay as you earn system was introduced, whereby employers are required by law to deduct a percentage of the employee’s income as tax and pay it over to the Commissioner on or before the 15th day of the following month.

The PAYE system was introduced to enable Government to better gauge the levels of income it would receive over the entire year.

Steady flow of income

Clarke said: “If individuals were allowed to pay their taxes when they filed in April, then the Government would be receiving a lump sum at April 30, but this income is needed over the entire year. By having employees pay on a monthly basis, this creates a steady flow of income that allows Government to better manage its budget.”

According to him, Government depends on income from taxation to supply a number of services for Barbadians and he listed them as including health, education and the provision of roads.

“If persons did not pay their taxes on time, Government would be left having to find ways to supplement the income, which may include borrowing from external sources. So, it is important that people pay their taxes on time,” he emphasised.

He pointed out that companies and self-employed persons are also required to make pre-payments. Companies pay theirs in September, December and March, while self-employed persons make pre-payments in June, September and December, with a final payment on April 30, when they file their returns.

Individuals are allowed a personal allowance of $25,000, while persons in receipt of pension income, who are over the age of 60, are entitled to claim a personal allowance of $40,000.

Clarke explained: “To arrive at the taxable income, all personal allowances and deductions are subtracted from the assessable income and tax is paid on the taxable income at specific rates. On the first $35,000 of taxable income the rate is 17.5 per cent and 35 per cent on the remainder. Companies, on the other hand, pay taxes on their profits, after all of the allowable expenses are deducted.”

Parents may claim for a maximum of two children, $1,000 per child if they fully support them or $500 if the mother and father are claiming; while a spouse can claim $3,000 if the mate is unemployed.

Additionally, taxpayers may claim up to $10,000 for home improvements, $240 as subscriptions to a registered trade union, up to $3,000 or 20 per cent of the amount paid for residential rents and up to $10,000 to Registered Retirement Savings Plans, among others.

A comprehensive medical expenses claim of $750 has been introduced for the 2012 Income Tax year for persons 40 years and over. Clarke said doctors would have to supply the information on their patients to the Department electronically. “They will need to get the national registration number of the patient and that information will flow directly into that person’s return,” he explained.

He pointed out that renewable energy was also a new area introduced and an individual may claim up to $10,000 per year for five years, and registered businesses up to $25,000, for the same length of time.

So, with just two and a half weeks to go before the April 30 deadline, taxpayers are being urged to file now and avoid having to pay penalties.

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