The United States Supreme Court ruled in 1927 that any income from criminal activities must be subjected to income tax. It might have been with that in mind that led then Prime Minister of Jamaica, Hon. Edward Seaga to declare in 1984 the imposition of tax on known drug dealers.

Tax efficacy

Taxation is not a punishment but a tool to produce desired effects while providing necessary revenue for the benefit of society. All members who stand to gain ought to pay their fair share to alleviate the burden borne by the captive wage earner. Unless and until income tax is replaced by consumption tax, all earned income as defined by the Income Tax Act must be taxed. And it does not mean that taxpayers should be passive, every legal means to avoid or reduce tax ought to be explored, but tax evasion is unfair to those in the tax net.

Alternative investment

The Financial Services Commission (FSC) has so far proceeded against the alternative investment schemes on the basis that they are not licensed with that body to accept deposits. But whether they are licensed or not, they are generating returns for its members and it is taxable. The Tax Administration Department (TAD) should request member’s statement from OLINT, Cash Plus and all the other operators of high-yield schemes and at the same time ask the FSC (or by order of the court) obtain a copy of the records seized in the 2006 raid on OLINT.

As an act of fairness arising from their own tardiness, the TAD should however grant a 90 days amnesty to delinquent taxpayers to file (amended) tax returns disclosing earnings from such schemes, even though ignorance of the law is no excuse.

There is substantial taxes here accruing to the government and they should not allow greed or retribution to get in the way of speedy collection.

Drug trade

In 1931 the alleged American gangster Alphonsus Capone (Al Capone) was convicted not on racketeering or extortion but tax evasion charges, including wilful failure to file tax returns. Although he undoubtedly controlled the bootleg operation in the Chicago area during the prohibition era, there was no evidence to warrant even an arrest; he owned nothing in his name.

The Americans are at it again, this time enriching gangsters and corrupting public officials beyond its own borders in the so-called war on drugs. The Jamaican government needs to take a sensible approach to the lost battle and follow through with what was proposed in 1984. In a statement to the House of Representative in February of that year, Mr. Seaga said, “They are no longer living in the shadows; a bright search light have been turned upon them, and we know who they are. One thing the government intends to do and is to see to it that this illegal activity is not encouraged as a tax incentive, a tax relief area of enterprise; but rather their activities will be taxed to ensure that they understand that this is not an area of gain”.

I cannot recall a single case of prosecution of a drug dealer for tax evasion, yet we have since enacted legislation to confiscate property of convicted dealers: more legislation less application. Even when the groundwork is purportedly done we fail to act, rather we kowtow to the Americans by extraditing our citizens instead of utilizing the evidence for prosecution on tax charges.

Inflation

It was Milton Friedman that said inflation is always and everywhere a monetary phenomenon.

In the global village we are the mercy of imported inflation and the United States has fully opened the tap on money creation, infusing cash because of the sub-prime (sub-crime) debacle to maintain the Fed’s discount rate. Inflation will likely follow and ahead of this commodity prices have jumped the queue, and the US dollar is tanking. Add to this the ethanol fad, which has driven wheat, corn, soybean and the prices of other staples record high, and with it meat prices.

Inflation clouds are on the horizon and will unleash its wrath in coming months. It is still not too late to diversify away from the US dollar by reallocating some portion of the Net International Reserves (NIR) into Euro, oil and gold. Monetary policy in terms of mopping up liquidity is self-defeating; as suggested above get the tax in from high-yield schemes and drug dealers so interest cost can be reduced and resources freed-up for the people’s business.  

Editor’s note: The revenue authority in another country has recently requested the on-line auction powerhouse, eBay to forward a list of transactions above certain values by all its residents.

Source: The Jamaica Gleaner, Wikipedia