Tuesday 31 January 2012
This week, the Income Tax Office is making the usual annual issue of tax returns so that taxpayers can report their income for 2011.
Since the beginning of 2008, taxpayers have been able to file their income tax returns using an on-line facility but, to date, the take up has not been great (approximately 5% of tax returns are currently returned electronically).
Rob Gray, the Director of Income Tax, said:
"Up to now, there have been relatively few benefits for taxpayers who file their tax returns on-line. When the system was first introduced, in 2008, the principal benefit was the speed with which the tax return reached the Income Tax Office. More recently, we introduced a "pre-filling" facility so that once an individual's return had been filed on-line, subsequent returns automatically had some text entered which avoids part of the chore of completing a paper tax return. We recognised, however, that if we wanted to make on-line filing the norm, rather than the exception, in the future, we had to make the benefits for taxpayers filing electronically much more significant than they are currently. That is why, from 13 January 2012, we are introducing two major enhancements:
- The introduction of an automatic assessing facility for individuals, and
- entry into a free prize draw for individuals who file their returns using the on-line system."
Why are you encouraging online filing ... what is wrong with the way it has always been done? There is nothing "wrong" with someone completing a paper return, in the same way as there is nothing wrong with someone using an "old fashioned" manual typewriter, but the fact of the matter is that we now live in a digital age and many people no longer use the same kind of computers, telephones, cars and household appliances that were used 5 or 10 years ago let alone 40, 50 or 60 years ago so why should the tax system be an exception? There are economic and environmental benefits to be gained by encouraging a better take up of the use of on-line facilities when island residents need to interact with the States, and income tax is an obvious example.
How will the automatic assessment facility work? Once a return is filed electronically, it will be received into the Income Tax Office computer system and the contents of the return will be examined, automatically, by computer, using a comprehensive set of predetermined parameters. The return will also be checked against data held within the Tax Office computer system, such as details of wages which have been returned by employers.
So long as the return passes those checks and parameters, it should be eligible to be automatically assessed, which means that an income tax assessment will be issued without any human intervention. For such cases, our target is to issue an assessment within ten working days of receipt of the return.
What if a return fails these checks? If a return does not pass the checks or fails to meet the preset parameters, it will be rejected from the automatic assessing system and brought to the attention of a Tax Assessor. The Assessor will know the reason why the return was rejected. If that matter can be resolved without further delay, the return will be passed back into the automatic assessing process.
Even if it is not possible to resolve the issue immediately, any return which is filed on-line will be dealt with in priority to a return submitted in paper form.
Is the on-line filing system safe and secure? Yes. Since its introduction there have been no reported incidents of unauthorised access and every form submitted has been successfully received by the Income Tax Office.
Is registering for on-line filing complicated? No. Previously, users have had two passwords to use the system - one to enter the States of Guernsey on-line services site, and another to enter the on-line tax return facility. In order to make the system more user-friendly, however, we are removing the need to have a second password.
Why have the free prize draw? There are benefits for taxpayers, the Income Tax Office and the island generally, from more people using the on-line filing facility. For taxpayers, they will be able to file their returns quicker than sending them by post or hand delivering them to the Income Tax Office. Returns filed on-line will be assessed more quickly so that people will either receive any repayments that are due to them sooner than they would if sending in a paper turn or, if they owe additional tax, they will know this sooner rather than later so they can more easily plan their personal finances. A common complaint we receive is that a return is sent in to the Tax Office and nothing is heard for several months. This is inevitable when all returns are examined by Assessors. The ability to use an on-line filing system combined with the automatic assessing enhancement means that many taxpayers will have more control over their income tax affairs. Obviously, the automatic assessing facility is likely to be most efficient for relatively straightforward income tax returns, but even those taxpayers with more complicated financial affairs will benefit because returns sent in electronically will be dealt with in priority to those sent in paper form.
For the Income Tax Office, clearly if returns can be dealt with through an automatic assessing function, this will free up staff time from mundane data processing, which can be spent on dealing with queries from people who have real tax problems, tax returns which cannot be automatically assessed and it will also allow resources to be diverted to tackle tax evasion and tax avoidance.
The island generally will also benefit because, in the course of time, it may be possible for the Income Tax Office to make significant reduction in costs if a large number of islanders choose to file their returns electronically. In addition, those using the on-line filing system have the option to elect not to receive a paper return in the future, and this will not only have savings implications for the States but also beneficial environmental consequences.
Because of the potential benefits that arise if many more people are encouraged to use the on-line filing facility than is currently the case, the Treasury & Resources Department has authorised the Director of Income Tax to enter people who file returns on-line into a free prize draw.
How will the prize draw work? The prize draw will be drawn in December and people who have filed on-line up to 30 November will be eligible (although political members and staff of the Treasury & Resources Department will be excluded from eligibility for the free prize draw). There will be three cash prizes and every entrant has a chance to win one. The prizes will be £2,500, £1,500 and £1,000.
The prizes will be funded from the anticipated savings on postage, stationery, etc, that increased use of the on-line filing facility will create. The Director of Income Tax has not received any additional funding, over and above the normal expenditure budget allocated to the Income Tax Office, to fund the prize draw.
The full terms and conditions of the prize draw can be found on the Income Tax Office website - www.gov.gg/tax.
Why only returns received up to 30 November? With effect from this year, a new regime for imposing penalties is being introduced for anyone who does not send in their returns on time. It was felt that only those who comply with the Law and send their returns in on time should be eligible for a chance to win a prize.
The new system sounds complicated - will it work? There is no doubt that the system that has been introduced to deal with automatic assessing is complex. The parameters and other checks that the computer will carry out on a return are designed to keep the possibility of errors and fraud to a minimum. Extensive testing has been carried out "off-line" but, as with all computer systems, whether or not it works will only be known once the "live" switch is thrown and returns from real taxpayers start to be received.
The Income Tax Office is fully prepared for the possibility that there may be some "teething problems" and, indeed, anyone using the system who encounters any problems/errors is encouraged to contact the Income Tax Office on 724711
Does Guernsey really need this ... isn't our tax system straightforward? We are now in the second decade of the 21st century yet, to a significant extent, the system in Guernsey of issuing paper returns to most taxpayers and manually processing them when they are submitted is still based on systems put in place in the early-20th century. Many countries around the world now successfully use comprehensive on-line filing facilities for their taxpayers. There is no reason why the system should not work well in Guernsey, indeed having a tax system which is relatively straightforward should make the use of on-line systems even more attractive and beneficial.
This is why the Income Tax Office considers an efficient, safe and secure on-line filing system to be a necessity rather than a desirable option, especially in these difficult economic times when it is necessary to limit government spending as much as possible . Issuing paper returns to the majority of the taxpaying public, and having highly trained officers examining what are often very straightforward returns, is not a good use of resources.
Over the next few years, the Income Tax Office will continue to make further refinements to the on-line filing system where these are considered to be desirable and is also looking at other aspects of tax administration with a view to modernising procedures and introducing economies wherever possible. One example already decided is that with effect from 2013, companies will be required to file their returns electronically in place of sending paper returns and copies of their accounts to the Income Tax Office.
The enhancements made this year are not the end of the journey, therefore, but rather they represent further steps along the road leading to even more improvements to come in the future.
Have there been any other changes this year? Also new, for the latest tax return, are 2 initiatives being introduced to assist small or part time businesses and self-employed persons. When completing their returns they will have a choice of submitting details of their business income by submitting a 3 line account (if they have a business where the turnover is less than £15,000) or, for more substantial businesses, by using a "profit & loss" template, set up by the Income Tax Office. By providing this service it should mean that information is received in a manner that is acceptable to the Tax Office and will help the forms to be processed more quickly.
