|Letter: Squeezing blood from a stone|
|Written by Peter Forbes|
|Friday, 13 January 2012 09:32|
Amendments to the Companies Ordinance now require companies, in addition to keeping proper books of accounts, to keep underlying documentation including invoices and contracts for a period of no less than five years. Failure to keep those records will render a company liable to a fine of up to $50,000. That’s right, $50,000! Those amendments to the legislation came into force on July 29, but most people are not aware of their obligations under the legislation.
Similarly, an amendment to the Customs Ordinance on Nov. 10 requires all importers to retain all records of imports for a period of five years, with a fine of up to $5,000 for failure to do so.
On Aug. 31, government released a statement saying that import duties were much lower than budgeted and that government feels the reason is because there might be under declarations by importers. The release went on to say that government will be looking into declarations currently at the Customs Department and pursuing importers where they find that items were under declared.
On the same day government issued a release by the Attorney General in relation to stamp duty, indicating that the Attorney General is expanding the scope of the Special Investigation and Prosecution Team’s (SIPT) investigation to include an investigation into whether there was/is a widespread practice of evading the payment of stamp duty, and that additional investigators will be secured to deal with the expanded workload. That is correct. Additional staff to deal with the expanded role of the $11,000,000 a year SIPT and Civil Recovery teams.
Similarly, on Sept. 6 another government press release quoted the new chief financial officer as indicating that “The country’s finances have been stabilised thanks to the U.K. government providing guarantees for the refinancing package and the process of modernising the country’s … revenue collection system.”
If readers have not yet felt the pain and figured this out, the above measures are preparation for a more onerous tax regime. It appears, also, that despite all the expertise that government and its many foreign advisors claim, they lack a basic understanding of what locals refer to as an inability to get “blood out of stone,” or what economists call an elastic demand curve, which is that in some cases minor increases in the price of goods or services will lead to a relatively large number of individuals choosing not to consume those goods or services.
What that means is that government can increase taxes as much as it likes, but if individuals don’t have the money, they might not consume as much goods or services, with a possible reduction in total tax revenue for government, defeating their very objective.
It appears that until we return to elected government, and possibly for some time after that, the idea that government should actively facilitate and promote business, that it should create incentives for inward investment, and that it should be an active salesman of the unique advantages of this destination is likely to be an idea that is less popular than efforts to create and promote a robust and expansive revenue collection regime.
From all indications, it appears that we need to get used to the idea of having government’s hands deep inside our pockets and then being hunted down and treated as crooks and criminals if there is a shortfall in government revenue.
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