Businesses may feel force of tax plan

 BUSINESS houses may feel the force of fiscal muscle if the Government decides to recoup unregulated tax revenue and withhold GST refunds for its 2015 supplementary budget, an economist says.

Institute of National Affairs executive director Paul Barker said the Government might zoom in on unregulated tax revenues forfeited over the years.

He said leaving revenue measures to the last quarter undermined the capacity to implement, especially if cuts had been made to operating funds for the Internal Revenue Commission and Customs to be able to go out and collect the revenue. “The big areas of forfeited revenue over the years include the multitude of unregulated small-medium, often overseas controlled businesses, in activities like retail, paying no GST or payroll tax etc,” Barker said. 

But he said such exercises came at the Government’s cost too.

He was commenting on where a K1.1 billion revenue required by the Government for the Supplementary Budget would be sourced from.

 “Achieving quick apparent extra revenue might be achieved by holding back GST refunds. But this would just be a deferral and would hit businesses hard. 

They are already suffering from the downturn in overall business activity during 2014 and 2015,” he said. 

“From the shortages of available foreign exchange it will be able to pay their international bills, or maintain turnover,” he said. 

He said the imposition of higher taxes on those businesses, which already paid taxes, during this time in the business cycle would also be felt. 

He said the Government should continue to encourage economic activities.