PAY YOUR TAXES
By SEAN DOUGLAS Thursday, February 27 2014
AS promoters and artistes rake in millions of dollars from revellers, the Taxman wants his bite of the Carnival pie, according to three paid adverts in yesterday’s Newsday by the Inland Revenue Division (IRD) of the Ministry of Finance and Economy. The adverts urges entertainers, promoters and band-leaders to pay taxes on their earnings from the season.
Millions of dollars are being spent on fetes, masqueraders costumes, comedy shows and top- drawing events such as Machel Monday and Iwer Wednesday, even as Panorama and Calypso Monarch now have $1 million first-prizes while Soca Monarch and Chutney Soca Monarch each have $2 million.
One ad titled “Carnival Advisory One” said the Board of Inland Revenue reminds entertainers and promoters of their responsibilities under the tax legislation.
The IRD listed the sources of income that must be reported in the income tax returns, including fees earned anywhere in the world. For “Entertainers” these are endorsement contractual income, competition winnings including the market value of non-monetary items (for example motor vehicles), live performance fees, music writers fees, music studio rentals, appearance fees and copyright music royalties from COTT and TTCO.
For “Event Promoters”, the advert said that where ticket sales/gate receipts are expected to exceed $360,000 they must register to pay Value Added Tax (VAT).
The Taxman is also eyeing earnings of the many foreign artistes who flock here to perform for Carnival. This season has seen Grenadian Mr Killa (Hollis Mapp) of “Rolly Polly” fame, Jamaican songbird Tessanne Chin, who performed just on Tuesday with Kees Dieffenthaller and the American dance troupe who back Machel Montano starring at local shows.
The second IRD advert titled “Carnival Promoters” dealt with foreign performers. It read: “Promoters, please be advised if you engage foreign artistes, foreign entertainers (or) foreign music bands, their income is subject to tax at rates specified by the Board of Inland Revenue. You are required to withhold and remit to the Board the relevant taxes within 30 days of payment of fees.”
A third notice was aimed at “Carnival Band Owners” all of whom are subject to tax regulations.
“Your income, including your competition winnings, is subject to tax,” said the advert. Band owners must also register for VAT where earnings are expected to exceed $360,000. “If registered for VAT you must issue a tax invoice for costume sales both domestic and online.”
Newsday spoke to an IRD source, a tax relations officer III, who said the notices were nothing new but simply a measure to remind individuals and groups of their responsibilities. Newsday asked if the tagline in the adverts, “Changing the way we interact with your,” indicates a new initiative to beef up the collection of taxes. The Tax Relations Officer replied, “That’s not new. It’s in all our adverts. That has been our tag-line for over ten years.” Might a big-prize winner try to duck paying taxes by thinking he/she won’t be caught? No. That (prize) is public knowledge, so for somebody in that category to ask that question would be a little strange because that’s public knowledge.
“If Mister X for example won the Soca Monarch 2014, that is public knowledge so the question of being caught or not really doesn’t arise, because that is information that is in the public domain,” the officer said. What if a Carnival bandleader claims to have just 1,000 masqueraders, but on Carnival Day has several thousand? “Well that would be the job of our compliance officers,” the officer replied, adding,“who would be keeping their eyes open and are aware of what is happening.” Asked if they would be out in the field, the officer said, “We do have our compliance officers out there.”
Should the IRD ask organisers of the Soca and Calypso Monarch competitions to pay 25 percent of the prize money as tax up front even before the prize-winner gets his/her hands on it? “Our policy is and has always been based on voluntary compliance. So we have to work also within the ambit of the legislation which mandates that the person who receives the income should honour their responsibility. It is not like emolument income which is like salaries and wages where there is an employee-employer relationship. The employer is bound by the PAYE regulations to first take out the taxes and remit it (to the IRD) before giving the taxes over to the employee.
There’s legislation for that, but for the earners of non-emolument income the have the responsibility on their own to come and pay their taxes. There are penalties for those who don’t comply,” the officer explained.
The penalties vary depending on the offence, the officer said. “The interest figure is 20 percent of the amount outstanding, and then if it is taxes that are supposed to be paid quarterly, there is another interest payment there.
“There is also a penalty for not reporting income. It’s stated in the legislation - the Income Tax and Corporation Tax Acts and the VAT Acts.”
The IRD source explained how tax is calculated for the Soca Monarch winner. “The 25 percent tax is not on the full $2 million. The artiste would have had expenditure that he or she would have incurred in order to be able to win that prize, so the artiste is allowed to offset the expenditure that comes with winning the prize-money, putting on his production and wining the income, so he’s allowed to access all of that before we apply the charges.
“It would definitely not be 25 percent of $2 million, but would be $2 million less his legitimate expenditure, and then we apply the tax-rate.” The official concluded, “We hope people see the IRD advertisements and really comply with the law and not have to force the hand of the law.” Newsday spoke to members of the mas’ and calypso fraternity.
Carnival bandleader, Mike “Big Mike” Antoine said he could not comment as he had not read the papers recently. Newsday said the IRD had simply issued a normal, routine reminder to pay one’s taxes. Antoine replied, “I’ll go up on the computer later and read it and you could always call me tomorrow.” Newsday called past Calypso Monarch Karene Asche, to date the only calypsonian to win $2 million, and as Asche was told the question about taxes, the phone went dead.
Newsday called back, Asche said “hello” but then the phone went dead again. A third call went to a busy tone. Reigning Calypso Monarch Eric “Pink Panther” Taylor was forthcoming, saying he has paid tax on his $1 million prize, plus paid the hefty cost of his presentation. Asked if he had complied with his tax obligations, Taylor replied, “Yes, yes, yes. All my taxes are up to date. I don’t make joke with that.” Did he find the tax-rate to be fair? “No, it’s not a fair rate but it’s the rate.” Had deductions for his production cost help lower his tax burden? “Yes, yes, yes. That helps. Last year my production costs were $212,000.”
He said that after his production costs were deducted from his earnings, the remaining difference was taxed at a rate of 25 percent.
Taylor declined to say exactly how much tax he had paid, citing security concerns.
Trinbago Unified Calypsonians Organisation (TUCO) head, Lutalo ‘Brother Resistance’ Masimba said, “I don’t think anybody is happy to pay taxes or willing to pay taxes but all calypsonians are law-abiding citizens and therefore they have to pay their taxes. It’s not a major issue for us.” Is it a fair rate, 25 percent after deductions?
“We don’t have a fair issue about how they compute the tax that is payable. This is one of the things that the BIR would have to make clearer to entertainers and other members of the public.” Newsday asked what a calypsonian would spend on his production for Dimanche Gras?
“I know that overall in terms of bringing music to the Carnival, the creators spend upwards of $15 million just to bring music for the Carnival collectively. That’s a conservative estimate,” Masimba said. “When you enter a competition now, it could be quite a tidy sum. I have known singers who would have won a second prize of $500,000, and at the end of the competition they would be in the red (in deficit).
That’s normal because their quest for prizes and stardom is so great that they would virtually spend as much as they could just to make sure they build a name for themselves.” Newsday asked about the tax-deductions by way of a calypsonian’s costs. “They have to pay dancers, they might use some special effects and so on. They might augment the band, they might spend money on costuming and by the time they do that, it’s quite a tidy sum.”
Masimba said Soca Monarch production costs were even higher than Calypso Monarch, such as when Machel Montano (or a lookalike) used a jet-pack to fly off over the audience.
He said TUCO has partnered with Central Bank and a top credit union to hold money management workshops for its members.