Employment Taxes and Contributions

Some examples of Complications in the Employment Tax and Statutory Contributions:

• Several different taxes and statutory contributions NIS, NHT, ET, PAYE & HEART.

• Some applicable to employee’s only (PAYE), some applicable to employer’s only (HEART) and others applicable on both employees and employers.

• Several different bases on which each tax or statutory contributions are calculated on, some restricted by employer’s total wage bill (HEART), some restricted based on each employee’s income (NIS), some deductible before calculating others, some have multiple rates (PAYE), including nil.

• Several different retirement ages, example NIS 70, NHT 65, ET none.

• Different returns, some requiring the same information S01 and S02, some have schedules which exclude certain taxes (Schedule S01A excludes HEART).

• Requirements for tax compliance verification from several different tax authorities or agencies (TAJ, NIS, HEART, NHT).

Proposed

The government has been moving in the right direction, but more is needed by way of simplification.

Scrap Multiple Returns

Currently

Employers are currently required to file 12 monthly S01’s on or before the 14th of the month following the end of the reporting period and an annual S02 by March 31st of the year following the end of the reporting year. The information required (schedule A) in support of the monthly filings is currently duplicated on the annual return, which does not make it apparent why an annual return is still required.

Proposed

Scrap the requirement for an annual return (S02) and only rely on the monthly filings to ease the administrative burden on taxpayers.

One Tax Base

Currently

Now there are five (5) different employment taxes and statutory contributions with four (4) different tax bases:

1. National Housing Trust’s (NHT) base is gross taxable emoluments of individuals18-65 years old.

2. Human Employment And Resource Training’s (HEART) base is gross emoluments modified by a monthly floor per employer. An employer only pays HEART if his monthly pay bill exceeds $14,444.

3. National Insurance Scheme’s (NIS)is gross taxable emoluments of individuals18-70 years old, modified by a weekly ceiling per employee. NIS is not applied on weekly emoluments is excess of$96,153.85.

4. PAYE and Education Tax are calculated on a base of statutory income, which takes into consideration gross taxable emoluments less allowable deductions, including:

1. Employee’s NIS contributions

2. Employee’s superannuation or approved retirement scheme contributions

Proposed

I am proposing that all 5 employment taxes and statutory contributions be subjected to one single tax base, being gross emoluments, which will ease the administrative burden on taxpayers.

Reduce Multiple Taxes

Currently

There are 5 employment taxes and statutory contributions:

1. Pay As You Earn (PAYE) or personal income tax on emoluments on employees only 

2. Education Tax on employers and employees

3. National Housing Trust( NHT) on employers and employees

4. National Insurance Scheme (NIS) on employers and employees5. Human Employment and Resource Training (HEART) on employers only

Proposal

I am proposing that all the above tax types be consolidated into one tax, “PAYE” which would fund NHT, NIS Fund, and the remainder to the Consolidated Fund. The government can administratively split the proceeds into the desirable proportion and distribute to the different agencies and funds. No agency should lose anything, and at the same time there would be a significant reduction in the administrative burden on taxpayers.

Proposed Simplified Employment Tax

Proposed

Summary of proposed measures to simplify the employment tax system: consolidate all 5 taxes and statutory contributions into one tax, “PAYE” calculated on gross emoluments, scrap S02 annual return and only use monthly S01. Administratively split proceeds into the desirable proportion and distribute to the different agencies and funds. No agency would lose anything and at the same time there would be a significant reduction in the administrative burden on taxpayers.

Employee’s PAYE Rates:

- 7.5% on gross emoluments up to threshold of $1,500,096 per annum

- 31.5% on gross emoluments between $1,500,096 and $6,000,000 per annum

- 331⁄3% on gross emoluments greater than $6,000,000 per annum

Employer’s PAYE Rates:

- 12.5% on gross emoluments up to $6,000,000 per annum

- 9.5% on gross emoluments greater than $6,000,000 per annum

​Benefits of Proposed Simplified Employment Tax

Benefits

1. Less administrative burden on taxpayers because of simplification in calculations and filing requirements.

2. Refunds tied to taxpayers filing returns. This is facilitated because benefits like pension contribution exemption and having NIS applied to up to $6m instead of previous $5m among other things will result in tax being refundable when returns are filed. Even NHT refund claims can be tied to employees filing their annual returns.

3. Increased compliance because of refund incentive and reduced admin burden.

4. Increased efficiency in tax collection and lower cost to tax administrators.

​The information contained in this article does not constitute legal or other professional advice or an opinion of any kind and is intended for general information purposes only.