TAXATION: PRICES, PROFITS & INCOME TAX

 

 

Untitl-1

By Man from Baker Hill

Last month my best friend died in Tortola and I wanted to be at her funeral. It was a natural emotion. Yet I decided not to go to her funeral; because I refused to pay to the government of Antigua the taxes that it would have collected from the price of my airline ticket to and from Tortola. I, the taxman, was shocked to learn the amount of tax , me, a resident Montserratian have to pay to the government of Antigua each time I purchased an airline ticket. I was made aware of the tax when, as if to make fun of me and my favorite subject, Julian Margetson of Runaway Travel informed me that the ticket from Montserrat to Tortola and back would cost $2300.00; and of that amount, the government of Antigua would be paid $311.17 in taxes. Wow! Waaow!

Julian assured me that the government of Montserrat would not receive a penny in taxes from the price of that airline ticket.  Montserrat would however receive the departure tax of $35.00. Additionally, Fly Montserrat would not pay $1.00 in tax on the profit made on the airline ticket. Wow! Fly Montserrat set its prices; and I suppose that their pricing is competitive enough for the company to achieve a profit. And no matter how much profit Fly Montserrat make, it will not pay any tax for another five years. That is a god blessed company.

Last year around Christmas or thereabout, I was at the Western Union. I went there to collect my neighbor’s allowance from her daughter in the UK. I stood in line for more than 90 minutes waiting my turn. And I saw it for myself. Prostitutes were shipping out loads of money. They earned it. They set their prices and collected. But not one cent of their income was paid into the Treasury as income tax.

The other day, I heard it for myself; the Minister of Education offered to provide five specially trained teachers for the children of Spanish speaking residents. Mind you, I lament not! But it was the agriculturist Claude Brown, who on his weekly radio program lamented, “Oh Garm, just give us one teacher for agriculture”.

In my most recent article on taxation, I hinted to Governor Davis that school children cannot write a simple sentence on taxation. Although the article was not directed to the Minister of Agriculture, he in a comment on the article intimated that the Man from Baker Hill does not understand ‘foreign direct investment’. Anyway, never mind him.

Just consider this. It is really nice here!  Yes, despite the politicians, it is truly nice.  And every day I am so happy to celebrate another day of life and living on a place called Montserrat. But sometimes I forget to acknowledge the mere pittance that I pay for the privilege to share with others the social and economic space of Montserrat.  That mere pittance which I pay is called taxation.

I do not know if taxation is written into the Montserrat Constitution; but I know that there is an unwritten social contract which requires residents of Montserrat to pay direct and indirect taxes for the niceness of Montserrat and the services enjoyed. And I, yes I, am prepared to pay those taxes as long as I live; I shall pay them whether I am rich or poor and even in sickness and death.

Yes it is really nice here, on Montserrat! And the systems of tax laws are very fair. The Laws require residents to pay according to their income, basically. The more you get from Montserrat, the more tax you will pay. The more food you purchase at the supermarkets, the more taxes you pay. If you have the most land and the biggest house, you will pay the most in property taxes.  If you buy the most expensive car or truck, you will pay the most in customs duty. The more money you earn, the more tax you will pay. A very fair system indeed; but there are issues of compliance.

Oh Gord, this rock, Montserrat truly nice!

This niceness comes from our quality of life. It is peaceful here. The children from whence they come get good schooling. The services are excellent; those provided by the church; and those which are provided by the SantoJacaMese. And for all other kinds and conditions of services, especially the most costly from the ladies of the night and days too, I am really grateful.

This article is captioned Prices, profits and income tax. But what is the relationship among prices, profits and income taxes? It is that relationship, which is the issue of this article. The relationship is taxation, that’s all! That’s it; once a person receives an income in Montserrat or from Montserrat, that person is subject to a charge of income tax.  The laws of Montserrat stipulate that there will be a charge of income tax on gains or profits from any employment, trade, profession or vocation accruing in or derived from Montserrat. But unfortunately there is the issue of compliance.

The Law uses the words profits or gains; and profits or gains come from the price that is charged for a thing. It does not matter whether that thing is a drink of rum, or the fees the doctors charge, or the fee the lawyer charge, or the fare you pay to the bus driver, or the price you pay for the newspaper or the wad of money you pay to the ladies of the night.  The Law also allows for the provider of that thing to include in the price all his costs and his expenses plus a little something for his profit. It is on this little something, the profit or gain, which income taxes are charged according to law.

On the matter of employment and the wages of the employee, it is not easy to determine profits from the price of services paid to the employee; so the law does not consider profits in order to tax employees and individuals. For example, an employee will be allowed a ‘basic part’ of his salary tax free and then he is taxed on the balance. The average tax which an employee pays is about 20 cents of every dollar he earns above the ‘allowed basic part’.

The Law is very strict on civil servants and other employees.  This group of persons pays their taxes before they receive their payment. Under any circumstances 20 cents of every dollar you earn is a lot of money to pay for anything, even taxes. But it is the obligation under the unwritten social contract which is embodied into the income tax regulations of the Laws of Montserrat. So the employees pay it as they earn it; they have no other choice. With this group of persons there are no compliance issues.

On the other hand, prices and profits are easily determined for persons carrying on trades. The trader supermarket operator knows his costs and his expenses, as well as his markup and hence could determine his profit or gain. It is on this profit or gain the trader is taxed.  It is recognized that on every dollar worth of goods sold in the supermarket, 2 cents is to cover the required income tax. In other words 2 cents of every dollar you pay at the supermarket is the amount that the owner must pay as income tax; and the owner knows that too. He need not look to any other source for his income taxes. The consumer pays it! Therefore there should be no compliance issues; yet there is.

Similarly, companies like Fly Montserrat, the sand miners and the truckers have hidden in their prices an element for income taxes. The law allows them to set their prices without hindrance and hence their profits are assured. Their customers are repaying them for every conceivable expense and for everything else, too. There is no need to give them tax concessions; and there is no reason for any compliance issue; but there is!

Then there are the other groups of tax- paying residents living on Montserrat; I cannot wrap my mind around their prices, profits or gains. These are the categories of persons that fall among prostitutes, doctors and lawyers. I cannot visualize their costs and expenses. It will be interesting to find out from them, if is unreasonable to suggest that 10 cents of every dollar of their price is the hidden figure for income taxes. And if this is so, then there are no reasons for them to have compliance issues. The incomes of the prostitutes for sure are not even considered as a source of income tax. They have no compliance issues; they simply send it out the country through Western Union, tax freeeeeeee.

I hope that you did not get lost in this maze of tax limericks; but if you did, you can re-read the article in small bites or at you leisure.

Anyway, what I have been trying to show is that the mere civil servant is required to pay on average 20 cents of each dollar earned in direct income taxes; and he pays it.  On the other hand the merchant trader collects 2 cents of every sales dollar for his share of taxes; but he will hire an accountant to avoid paying those 2 cents into the treasury. The prostitutes and the other professionals collect from their clients about 10 cents of each dollar for income taxes.  Some take the whole ‘hairy thing to bank’ at Western Union; while the others have severe compliance issues.

I see crises ahead! There is a taxation crisis; and our politicians bury their heads under the skirts of the Diaspora looking for direct foreign investment.  Montserrat will have a taxation crisis before the next budget day if they do address the matter boldly. This tax thing might even become a Leadership crisis.

Imagine Antigua collects over $300.00 in taxes on my airline ticket; Fly Montserrat charges a price that includes a profit but is forgiven its taxes; the prostitutes take all their gains to Western Union without paying any taxes. And my political leaders confuse us with words of ‘foreign direct investments’ and further befuddle our minds with their grandiose plans to provide special teachers for the children of Spanish residents who mostly western union us. And Oh God, Montserrations struggle to find agriculturalist to teach us how feed ourselves.

Waaaowww! I wonder if Minister Hogan understands that Montserrat needs some more ‘local direct investment; namely, in tax education, agricultural teachers and in tax compliance education. And I wonder if the politicians are aware of or even understand the relationships of Prices, Profits and Income tax… and Western Union.

 

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A Moment with the Registrar of Lands

 

 

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By Man from Baker Hill

Last month my best friend died in Tortola and I wanted to be at her funeral. It was a natural emotion. Yet I decided not to go to her funeral; because I refused to pay to the government of Antigua the taxes that it would have collected from the price of my airline ticket to and from Tortola. I, the taxman, was shocked to learn the amount of tax , me, a resident Montserratian have to pay to the government of Antigua each time I purchased an airline ticket. I was made aware of the tax when, as if to make fun of me and my favorite subject, Julian Margetson of Runaway Travel informed me that the ticket from Montserrat to Tortola and back would cost $2300.00; and of that amount, the government of Antigua would be paid $311.17 in taxes. Wow! Waaow!

Julian assured me that the government of Montserrat would not receive a penny in taxes from the price of that airline ticket.  Montserrat would however receive the departure tax of $35.00. Additionally, Fly Montserrat would not pay $1.00 in tax on the profit made on the airline ticket. Wow! Fly Montserrat set its prices; and I suppose that their pricing is competitive enough for the company to achieve a profit. And no matter how much profit Fly Montserrat make, it will not pay any tax for another five years. That is a god blessed company.

Last year around Christmas or thereabout, I was at the Western Union. I went there to collect my neighbor’s allowance from her daughter in the UK. I stood in line for more than 90 minutes waiting my turn. And I saw it for myself. Prostitutes were shipping out loads of money. They earned it. They set their prices and collected. But not one cent of their income was paid into the Treasury as income tax.

The other day, I heard it for myself; the Minister of Education offered to provide five specially trained teachers for the children of Spanish speaking residents. Mind you, I lament not! But it was the agriculturist Claude Brown, who on his weekly radio program lamented, “Oh Garm, just give us one teacher for agriculture”.

In my most recent article on taxation, I hinted to Governor Davis that school children cannot write a simple sentence on taxation. Although the article was not directed to the Minister of Agriculture, he in a comment on the article intimated that the Man from Baker Hill does not understand ‘foreign direct investment’. Anyway, never mind him.

Just consider this. It is really nice here!  Yes, despite the politicians, it is truly nice.  And every day I am so happy to celebrate another day of life and living on a place called Montserrat. But sometimes I forget to acknowledge the mere pittance that I pay for the privilege to share with others the social and economic space of Montserrat.  That mere pittance which I pay is called taxation.

I do not know if taxation is written into the Montserrat Constitution; but I know that there is an unwritten social contract which requires residents of Montserrat to pay direct and indirect taxes for the niceness of Montserrat and the services enjoyed. And I, yes I, am prepared to pay those taxes as long as I live; I shall pay them whether I am rich or poor and even in sickness and death.

Yes it is really nice here, on Montserrat! And the systems of tax laws are very fair. The Laws require residents to pay according to their income, basically. The more you get from Montserrat, the more tax you will pay. The more food you purchase at the supermarkets, the more taxes you pay. If you have the most land and the biggest house, you will pay the most in property taxes.  If you buy the most expensive car or truck, you will pay the most in customs duty. The more money you earn, the more tax you will pay. A very fair system indeed; but there are issues of compliance.

Oh Gord, this rock, Montserrat truly nice!

This niceness comes from our quality of life. It is peaceful here. The children from whence they come get good schooling. The services are excellent; those provided by the church; and those which are provided by the SantoJacaMese. And for all other kinds and conditions of services, especially the most costly from the ladies of the night and days too, I am really grateful.

This article is captioned Prices, profits and income tax. But what is the relationship among prices, profits and income taxes? It is that relationship, which is the issue of this article. The relationship is taxation, that’s all! That’s it; once a person receives an income in Montserrat or from Montserrat, that person is subject to a charge of income tax.  The laws of Montserrat stipulate that there will be a charge of income tax on gains or profits from any employment, trade, profession or vocation accruing in or derived from Montserrat. But unfortunately there is the issue of compliance.

The Law uses the words profits or gains; and profits or gains come from the price that is charged for a thing. It does not matter whether that thing is a drink of rum, or the fees the doctors charge, or the fee the lawyer charge, or the fare you pay to the bus driver, or the price you pay for the newspaper or the wad of money you pay to the ladies of the night.  The Law also allows for the provider of that thing to include in the price all his costs and his expenses plus a little something for his profit. It is on this little something, the profit or gain, which income taxes are charged according to law.

On the matter of employment and the wages of the employee, it is not easy to determine profits from the price of services paid to the employee; so the law does not consider profits in order to tax employees and individuals. For example, an employee will be allowed a ‘basic part’ of his salary tax free and then he is taxed on the balance. The average tax which an employee pays is about 20 cents of every dollar he earns above the ‘allowed basic part’.

The Law is very strict on civil servants and other employees.  This group of persons pays their taxes before they receive their payment. Under any circumstances 20 cents of every dollar you earn is a lot of money to pay for anything, even taxes. But it is the obligation under the unwritten social contract which is embodied into the income tax regulations of the Laws of Montserrat. So the employees pay it as they earn it; they have no other choice. With this group of persons there are no compliance issues.

On the other hand, prices and profits are easily determined for persons carrying on trades. The trader supermarket operator knows his costs and his expenses, as well as his markup and hence could determine his profit or gain. It is on this profit or gain the trader is taxed.  It is recognized that on every dollar worth of goods sold in the supermarket, 2 cents is to cover the required income tax. In other words 2 cents of every dollar you pay at the supermarket is the amount that the owner must pay as income tax; and the owner knows that too. He need not look to any other source for his income taxes. The consumer pays it! Therefore there should be no compliance issues; yet there is.

Similarly, companies like Fly Montserrat, the sand miners and the truckers have hidden in their prices an element for income taxes. The law allows them to set their prices without hindrance and hence their profits are assured. Their customers are repaying them for every conceivable expense and for everything else, too. There is no need to give them tax concessions; and there is no reason for any compliance issue; but there is!

Then there are the other groups of tax- paying residents living on Montserrat; I cannot wrap my mind around their prices, profits or gains. These are the categories of persons that fall among prostitutes, doctors and lawyers. I cannot visualize their costs and expenses. It will be interesting to find out from them, if is unreasonable to suggest that 10 cents of every dollar of their price is the hidden figure for income taxes. And if this is so, then there are no reasons for them to have compliance issues. The incomes of the prostitutes for sure are not even considered as a source of income tax. They have no compliance issues; they simply send it out the country through Western Union, tax freeeeeeee.

I hope that you did not get lost in this maze of tax limericks; but if you did, you can re-read the article in small bites or at you leisure.

Anyway, what I have been trying to show is that the mere civil servant is required to pay on average 20 cents of each dollar earned in direct income taxes; and he pays it.  On the other hand the merchant trader collects 2 cents of every sales dollar for his share of taxes; but he will hire an accountant to avoid paying those 2 cents into the treasury. The prostitutes and the other professionals collect from their clients about 10 cents of each dollar for income taxes.  Some take the whole ‘hairy thing to bank’ at Western Union; while the others have severe compliance issues.

I see crises ahead! There is a taxation crisis; and our politicians bury their heads under the skirts of the Diaspora looking for direct foreign investment.  Montserrat will have a taxation crisis before the next budget day if they do address the matter boldly. This tax thing might even become a Leadership crisis.

Imagine Antigua collects over $300.00 in taxes on my airline ticket; Fly Montserrat charges a price that includes a profit but is forgiven its taxes; the prostitutes take all their gains to Western Union without paying any taxes. And my political leaders confuse us with words of ‘foreign direct investments’ and further befuddle our minds with their grandiose plans to provide special teachers for the children of Spanish residents who mostly western union us. And Oh God, Montserrations struggle to find agriculturalist to teach us how feed ourselves.

Waaaowww! I wonder if Minister Hogan understands that Montserrat needs some more ‘local direct investment; namely, in tax education, agricultural teachers and in tax compliance education. And I wonder if the politicians are aware of or even understand the relationships of Prices, Profits and Income tax… and Western Union.