KPMG Tax Director: Tax betting and gaming activities

Government should look to the example set by Barbados and start charging Value Added Tax (VAT) on betting and gaming activities in Trinidad and Tobago.

This was the advice coming from Tax Director of KPMG’s TT operations, Nicole Joseph, during a post-budget forum hosted by the American Chamber of Commerce of Trinidad and Tobago’s (AmCham) at Hilton Trinidad, Port-of-Spain this past Tuesday (October 6).

“In Barbados in June 2015 there was a reduction in income tax rates… matched with the removal of certain tax deductions.

Interestingly enough, Barbados introduced VAT at 17.5 percent on betting and gaming activities which activity was previously exempt.

These activities are also exempt from VAT here in TT, so perhaps the levying of VAT on these activities ought to be considered in the reform of the VAT system mentioned by (Finance) Minister Colm Imbert,” Joseph stated.

KPMG is one of the largest professional services companies in the world and one of the ‘Big Four’ auditors along with Deloitte, Ernst and Young and PricewaterhouseCoopers.

During his October 5 budget presentation in Parliament, Imbert spoke of plans to improve tax collection through the establishment of the Revenue Authority.

Referring to this, Joseph expressed hope that the minister “would still be in a position to rely on the technical and administrative work that was undertaken in 2010, and realise the potential for increased revenue collection.” KPMG’s Tax Director then said with Government seeking to increase revenue through increases in some taxes and improved collection of such, it should take heed of what the United Kingdom (UK) did in its 2015 budget.

“The government increased funding to HMRC (Her Majesty’s Revenue and Customs) by £60 million by 2021 to allow HMRC to step up criminal investigations into serious and complex tax crime, with the aim of raising £600 million.” “Additionally, the UK government will invest around £300 million over five years to tackle non-compliance by small and med-sized businesses, public bodies and affluent individuals.

A measure that they forecast will result in additional tax receipts of more than £2 billion by 2020 to 2021. And this level of investment for a very savvy English tax system,” Joseph declared.

The implementation of Transfer Pricing legislation was another of Imbert’s announcements which Joseph reviewed in her presentation, asking if the introduction of such would “curb the leakage in our tax revenue stream?” She pointed out that Section 67 of the Income Tax Act deals with artificial transactions, as do the various tax treaties which TT has negotiated in the Associated Enterprises articles.

Joseph therefore suggested that the real solution to “tax leakage” lies in the combination of current laws, Transfer Pricing legislation and “strict enforcement” of these by way of proper audits, proper training of Revenue Authority staff and so on.

Transfer Pricing, as explained by Joseph, is the setting of the price for goods and services sold between related parties. In principle, a transfer price should match either what the seller would charge an independent, arm’s length customer, or what the buyer would pay an independent, arm’s length supplier.

Joseph added that “while unrealistic transfer prices do not affect the overall enterprise directly, they become a concern when they are misused to lower profits in a country. It is seen as a major tool for corporate tax avoidance.”