A most taxing problem

By CASWELL FRANKLYN
| Wed, April 18, 2012 - 12:00 AM

()

SOMETIME AGO, Government introduced a budgetary measure that required taxpayers to pay tax on fixed travelling and entertainment allowances. The Minister of Finance stated that the measure would be in force for 18 months.

Immediately, the tax was condemned as being unfair because the minister failed to make, or did not understand, the distinction between the two different types of fixed travelling allowances paid by Government.

One is a salary perk paid to senior officers as a means of avoiding taxes, while the other is a reimbursement for travelling that is actually done in the performance of duty that would have been fixed at a particular figure.

The travelling allowance paid to court marshals, who serve and execute court process documents, falls into the latter category. In effect, court marshals use their personal vehicles to do their duty, and Government reimburses them some of the cost they incur while doing their jobs.

It is particularly shameful for Government as the employer to turn around and tax the reimbursement which was previously taxed.

Travesty

That travesty was brought to Government’s attention, and the Minister of Finance was forced to point out that the measure was not intended for persons like court marshals and postmen who receive fixed travelling allowances, but have no option other than to travel to perform their duty.

Eventually, the minister went to Parliament and passed legislation to clarify that the travelling allowance that is paid to marshals and other officers in similar circumstances is not taxable. Paragraph (d) of Section 9 (1) of the Income Tax Act was deleted and replaced with the following that exempted the payment of income tax from:

“(d) Amounts advanced or received in the income year to be used exclusively to cover the cost of travel in the performance of duties of an officer or an employee in respect of his office or his employment where that travel is away from the place of business of his employer or from different places.”

If that were not clear enough, a new subsection (1A) was inserted that says:

“(1A) For the avoidance of doubt, with respect to paragraph (d) of Subsection (1), where an officer is entitled to be reimbursed for any amount of travel in the performance of the duties of his office or employment, that amount is not taxable.”

According to the amendment act, those provisions came into force with effect from income year 2011.

Despite the minister’s emphatic statement and the passage of the relevant legislation, some public officers defy the law and continue to tax those allowances. When the matter of taxing the travelling allowance was drawn, by letter dated June 20, 2011, to the attention of the permanent secretary in the Ministry of Finance and copied to the minister, this was the reply by letter dated July 19, 2011:

“Please be advised that the matter is currently engaging the ministry’s attention.”

At the date of writing this article (April 15), it would appear that the matter is still engaging their attention, with no corrective measures being taken.