Is sanction system for Income Tax Assessment unfair?

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Is sanction system for Income Tax Assessment unfair?

Do we have an unjust/inequitable law or is it an administrative deficiency? This missive is not a criticism, nor an attack on the Inland Revenue Department (IRD). It is a plea for a review of what currently transpires after we lodge our annual tax return.

In order to reinforce my thinking of the matter, I will refer to what transpired at Customs in 1960/70s. The Customs Act provided for an importer whose goods were seized, to take the matter to court within 21 days to have the goods released or forfeited.

An adviser who was on secondment suggested that provision was unfair. The attorney general, in agreement, had the law amended, providing for Customs to sue in order to determine the forfeiture of the goods.

This worked well until recently when seized goods were allowed to remain on the docks without any action by Customs to determine their forfeiture, according to news media reports. Although the law was just, administrative deficiency negated it.

Now to the IRD matter, this in my opinion is unfair. I am not sure how the relevant section reads but it cannot be fair for a taxpayer who lodged his return on time, to be penalised with interest at 1.04% per month plus 10% penalty on the additional tax payable on assessment.

To illustrate:-
1. taxpayer lodges return for year 2015 on 28 March 2016
2. the IRD assesses that return in June 2020 and finds $200.00 more tax to be paid
3. The IRD adds a 10% penalty of $20.00 plus interest at 1.04% per month from the due date 1st April 2016 simple interest is $112.32. IRD charges compound interest which means the taxpayer will pay more than $132.32 in addition to the $200.00.

Why should it take 54 months to assess an income tax return? One is likely to conclude that it is not the law, an administrative deficiency for this inequitable system which has been in force for more than a decade.

At Customs Regional Training School I learned that the law cannot or doesn’t envisage/anticipate every eventuality. Do you think the legislators who promulgated that law expected it to take that long to assess a personal tax return?

In this technologically advanced age, it should not take that long to assess a personal tax return. Or maybe it is in-adequacy of staff or office equipment? A friend in the USA informed me returns and refunds are usually done by the next filing date. Another one in Canada informed me, he normally files his return online and his assessment is approved within 2 to 3 weeks maximum, refunds are paid promptly.

The irony of our system is with refunds. The due date is not used to determine interest, it is, I think, the date of assessment.

Further, the IRD is seldom provided with sufficient funding in the vote to affect refunds expeditiously. It is necessary to reiterate that taxpayers tend to be more willing to pay their taxes if the rates are reasonable and the system is just and equitable.

A review of the system is long overdue.

— Victor E Girard, Patriot

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