1 / 17

Strategies for Taxation of Self-Employment: Maximizing Compliance and Revenue Generation

This presentation explores various strategies for taxing the self-employment sector and highlights the importance of classification, challenges faced, legislative requirements, and the effects of socio-cultural factors. It also discusses the goals of tax administrations and the tools and strategies required for dealing with non-compliance.

elton
Download Presentation

Strategies for Taxation of Self-Employment: Maximizing Compliance and Revenue Generation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. OVERVIEWSTRATEGIES FOR TAXATION OF THE SELF-EMPLOYMENT SECTORPresented bySabina Walcott-DennyCommissioner of Inland RevenueBARBADOS

  2. Introduction • The self-employed sector represents a significant percentage of the tax paying community in all CATA countries. • Accordingly, this sector merits special consideration in view of its potential for contributing in a meaningful way to the development of a country’s social and economic landscape.

  3. Introduction (cont’d) • With the increased prevalence of self-employment it is important that tax administrations devise various strategies for taxing the income generated from this sector. • Indeed this sector is being used as a conduit for economic expansion in many countries.

  4. Importance of Classification of Business as Self-Employment • A determination of what is self-employment is important in order to formulate taxation strategies for its management and control.

  5. Classification Approaches Adopted • In determining whether a business should be classified as self-employed many countries adopted different approaches. • Australia for example, divides its taxpaying community into six groups. Of these the micro-business sector comprising businesses with an annual turnover of less than A$2 million is considered self-employed.

  6. Classification Approaches (Con’t) • Some other countries classify business as self-employment according to the structure of the business. In these cases partnerships and sole traders are considered as self-employment.

  7. General Characteristics of Self-Employment Despite the different criteria used for classification, generally there are some notable and common features. • Businesses are usually owner-operated/controlled • Businesses usually start as small operations • Customers are mainly individuals • Cash transactions are frequent/common place

  8. Sectors In most CATA countries the self-employed, formal/informal are concentrated in key segments of the economy. Some sectors which have been highlighted are: • Agriculture • Fishing • Service industries • Trading • Professionals – doctors, lawyers, accountants etc • Cottage industry • Construction • Manufacturing

  9. Challenges • Many operate in informal sector • Lower tax compliance • More difficult to register • Poor or non-existing records • Absence of fixed business premises, that is itinerant traders/moving vendors • Low literacy level • Indifference to payment of taxes • Lack of understanding of taxation laws • Understatement of income

  10. Legislation (Generally) • Self-employed required to pay tax • Requires self-employed to file returns • Requires self-employed to keep records • Penalties apply for non-filing • Penalties for non-payment • Allow capital allowances and deduction of expenses

  11. Effects of Socio-Cultural Factors • In Kenya some individuals believe that working in “the hot sun of Africa” means that there should be no taxation. • In Barbados members of the informal sector such as mobile canteen operators and street vendors regard themselves as “the poor man in the street who is struggling to make a living and therefore taxation should not form a part of his vocabulary”.

  12. Goals • Tax administrations’ main goal should be to collect a high percentage of tax due from the self-employed • Increase the number of filers • Improve the quality of record keeping • Increase voluntary compliance • Increase revenue collection

  13. Tools Required to deal with Self-employed • Unique identification number by both self-employed and other agencies • Clear and simple laws • Professionally trained Staff – collectors and auditors • Use of electronic media – information technology • Information from third party

  14. Strategies Several strategies have been employed by tax administrations to deal with problems of non-compliance in the self-employment sector. These include: • Customer education and service programmes • Field surveys to measure problems and gain information for necessary action • Simplified methods of taxation

  15. Strategies Cont’d • Strengthen administration capacity including auditing and enforcement • Collaboration of various governmental/non- governmental agencies • Overall increase in revenue from this sector

  16. CONCLUSION The self-employment sector is a fertile environment for growth and expansion within the economy. Tax Administrators must have an effective Programme of measures designed to select and implement strategies aimed at securing tax Compliance.

  17. THANK YOU

More Related