By J. Brock (FINN)
A public meeting was held in the court and Assembly Chamber of the town hall at 1700hrs on Monday, 18 august 2014. Present were The Hon Mr roger Edwards, MLA, the Hon Mr Mike Summers, MLA, the Hon Mrs Jan Cheek, MLA, the Hon Mrs Phyl Rendell, MLA, the Hon Mr Michael Poole, MLA, and the Hon Gavin Short, MLA. Dr the Hon Barry Elsby and the Hon Mr Ian Hansen did not attend.
The Hon Mr Roger Edwards went on to read question No 3.
Why can't the taxes that are paid by the employer be a deductible expense for their own taxes (Corporate or private) in the same way as other employer related expenses, given that there is no benefit to the employer – l. E. if you employ people from overseas, paying MST does not entitle the employer to free access to all of the health care system, outside and sometimes costly medical insurance is still required? Further to this, the tax does not take into consideration the administrative burden of administering the tax by the employer, and thus meaning that the tax should be deducted from taxable profits to compensate for this effort and time.
Answer to Question No 3: MST is a tax of the Falkland Islands’ Government and as a general principle taxes cannot be deducted from profits to be assessed by the Falkland Islands’ Government for other taxes.
Section 59 (i) of the Taxes Ordinance states:
59 Deductions not allowed:
Subject to any contrary provision of this Ordinance, no deduction in respect of-
(i) any amount paid or payable under the Medical Services Tax Ordinance (No. 13 of 2010).
Question No. 4: We appreciate the increase in personal allowance to f60,000 retrospectively but does this not mean that the lower paid are still penalised as they have to wait until 2015 to get this refund and in some cases this defeats the point as they are living from day to day and need the money now.
Answer to Question No. 4: Members undertook some considerable deliberations with regards to the introduction of the uplift of the personal allowances during Budget Select Committee. lf this had been introduced on the 1st July to coincide with the new financial year this would have placed an unprecedented administrative burden on both individuals, employers, self-employed and the Tax Office as it would have required all individuals including companies to complete a second tax assessment for the period 1st January 2014 - 30th June 2014.
ln light of this Budget Select Committee decided that it would be best for all concerned to retrospectively introduce the new allowance which could be administered within the normal tax assessment cycle but introduce this new allowance the full 12 month period.
RE: in other words if we had introduced it there and then, it would have made it incredibly difficult for anyone to get it back but to recognise that they will get the full refund they can have more time to do it thoroughly than if everyone did more work to achieve it.
JC: The genuinely very low paid – under £15,000.00 would not be paying.
PR: this will continue to be an issue with this Assembly and we will address it again, I am sure as roger says, in the next budget.
RE: The fact of the matter is, yes it is a tax. I am sure you remember the big debates over Medical Services Levy. It was very much a split decision but it does bring in a large amount of money and when you are forming a budget you need money to come in so you can spend it on other things. And if we could have found another million pounds or whatever I am sure we would have done but as I say, I am sure this will go forward and continue to be a very hotly debated subject.
JC: one of the reasons I think it was split in the way it was - we were faced with not a balanced budget but one which already had a deficit and the alternatives to MST that we could see at that time were either cutting back on some service or charging more for others. And whatever you have been told to the contrary, it is fact that the Medical Services Budget has, probably in the life of this cycle of MST gone up by around £3Million.
PR: I would argue that the Medical Department’s budget would have gone up anyway regardless of MST
RE: It has gone up and that is the problem. That is one of the problems. Costs are rising. I think there has been some background information that charges and costs are rising quite dramatically. I forget what medical service treatment overseas cost last year but it was huge.
MS: £1.6 Million.
Phil Middleton: forget all the arguments one way or the other the bit that I am confused about is that we raised the threshold level to £60,000.00, so either in real figures or in percentages, how much have you cut the Black hole? You have taken an awful lot of people out of the MSL bracket because not many of us get £60,000.00 to start paying, so are you satisfied now you are bringing figures that £60,000.00 actually is a big enough lump sum to make it worthwhile keeping it at £60,000.00? Or otherwise, why do it at all?
RE: It was a compromise. There were other options that we were presented with. During Budget Select Committee the whole thing was really hotly debated. We were presented with a series of options to go forward with MST and the most acceptable to the majority was this raising of the threshold. To £60,000.00 rather than doing it by other means and taking somebody totally out of the MST and leaving others in but is still and quite rightly an employment tax. The £60,000.00 of course, is for the employee.
Phil Middleton: My question is still is there enough people in our community that earn over and above £60,000.00 that pay the tax that makes it worthwhile still having the tax at the £60,000.00 threshold?
MS: Yes there are. There are people employed in the mainstream. There are also a whole other group of people whose taxes are treated rather differently and therefore pay MST irrespective of the rate at which they are paid and they remain within the tax-paying sphere. It was a compromise. I would have done away with it but I accept that other people were fearful if we had done away with it we would have exposed ourselves to further risk if income didn’t accrue as expected in other areas.
RE: As I say, with the options we were given there were numbers attached to how much we would raise and so on and the compromise was the £60,000.00. We felt it was the best way forward at the time.