Letter to the Editor - SCR1.3 billion in perspective – SCR1.3 billion outstanding vs SCR40 billion collected (2008 – 2010) |01 March 2017

Over the last few days, there has been much talk about SCR1.3 billion in tax revenue not collected.  On its own, this is a massive number, alarming, jaw dropping leading to grave concerns – No one is paying tax!  No one is collecting!

Let us put the numbers in perspective.

1.         How much did SRC actually collect?

Source:  http://www.src.gov.sc/pages/aboutus/SRCReportAndPlan.aspx

Over 6 years, from 2010 – 2016, the SRC collected a whopping SCR33.04 billion.  We don’t have information for 2008 and 2009 but assuming the collections was at par with 2010, then we can assume that over the 10 years the SRC collected approximately SCR38 billion to SCR40 billion.

The average increase in tax collections year on year was 9.46% which is higher than the average growth rate of the country. 2016 showed a lower growth rate due to the removal of PIT on majority of tax payers. 

2.  SCR 1.3 billion is an accumulation over 10 years 2008 - 2016.

3.  If we take this as a percentage of the total collections over these years, it amounts to 3.25%.  For any organisation, or company the normal value of debtors would be in a range of 3% to 5%.  In fact, the SRC debtors probably looks better than the debtors in the books of many tax agents and businesses.  

The key question arising is why is it outstanding and what is being done to collect it?

4.   We understand that about half of SCR1.3 billion is in dispute or has been identified for write off.  For the amount in Court or at objection stage we would have to wait for the Courts to rule.  Tax payer dispute is normal.  In fact, it helps set taxing precedence.  If government wants the money faster, the other option would be to settle but it would bring down the amount collected as settlements may have to be done at a midway value.

5.  This brings the outstanding debtors to about SCR700 million or overall 1.75% which is on the lower side of the debtors range.        

6.   This further needs to be analysed for penalties, actual taxes, assessments raised based on estimates which are often inaccurate.

7.   After doing this exercise the amount recoverable may be around half or SCR350 million or 0.88% of overall amount

Once we put the figures in perspective, we see that tax payers have been paying tax and the SRC has been collecting. Otherwise how has the country been running?

The challenges that both tax payers and the government face are the new laws being passed regularly by policy makers who have frequently changed with little say by either of the main parties.  Some of these laws have brought in a heavy administrative burden which is cumbersome for a small country constrained for skilled power – neither the businesses nor the SRC have the manpower to deal with this.

Also, some of the new laws are complex, have many ambiguities, grey areas which sadly remain unresolved and often are the reason why tax cases end up in dispute and receipt of funds delayed.

We need to simplify our tax code, make it easy to understand and administer for both the payer and the Revenue Authorities, while ensuring the country reaches its collection targets.   

Malika Jivan