If you are one of the thousands of people resident in T&T who are earning foreign exchange, the law says those earnings are liable to be taxed in this country, according to two tax accountants at local firms.
The issue of the taxation of foreign earnings was raised on Wednesday at a Joint Select Committee (JSC) on Foreign Affairs that was looking into the effectiveness of T&T’s cultural diplomacy and opportunities for strengthening the country’s cultural and tourism products.
The chair of the JSC, Minister of Trade and Industry Paula Gopee-Scoon, lamented the failure of the Ministry of Foreign and Caricom Affairs and the Ministry of Tourism, Culture and the Arts to streamline and formalise culture as a business.
That point was taken up by United National Congress (UNC) MP for Naparima, Rodney Charles, who suggested that revenue could be raised by taxing the chutney, soca and calypso artistes who perform throughout the region and the world as well as collecting taxes on materials that are being imported to make mas costumes.
On Thursday, Minister of Tourism, Culture and the Arts, Randall Mitchell, told Guardian Media that the Government had no intention of taxing either artistes who perform abroad or the imported materials used to create Carnival costumes.
“Now, whether or not this is a specific proposal, and a specific fiscal measure to be levied by a UNC government, is a matter for the UNC. However, let me state it categorically that there was never and presently there is no recommendation, suggestion, plan, or any faint idea by the Ministry of Tourism, Culture and the Arts for the imposition of any additional taxes on any cultural practitioner performing locally or abroad...
“The statements made (on Wednesday) by member Rodney Charles at the Joint Select Committee are indeed unfortunate and, in fact, run contrary to the work and the collaboration taking place between the Ministry of Tourism, Culture and Arts, the Ministry of Foreign and Caricom Affairs, and many of the embassies to ensure that there is smooth passage for artistes to get their work permits, work visas, to work and export the culture abroad,” Mitchell said.
But in a news release on Thursday, the Ministry of Tourism said, “All cultural practitioners, including artistes working both locally and abroad, are presently subject to the tax provisions of the country, as are all other citizens.”
On Friday, Minister of Finance, Colm Imbert, issued his own news release referring to “a mistaken belief that a JSC is a policy-making body and that a JSC has the power to change our tax laws or to initiate such a process.”
He added that for the avoidance of doubt, parliamentary committees, “while essential for our system of democracy and for transparency in matters of State, are simply empowered to enquire into, and examine and report on, various matters.
“Unlike the Cabinet, JSCs are not responsible for initiating and deciding on policy or the direction and control of the Government of Trinidad and Tobago and a JSC certainly cannot formulate a plan to impose new taxes.”
Referencing the suggestion of taxing artistes, on Thursday one tax accountant at a local accounting firm said, “That is the most ridiculous thing I have ever heard. As Trinidad nationals, you are taxable on your worldwide income. If (artiste name called) goes to sing at Madison Square Garden (in Manhattan), as a Trinidadian who is resident and domiciled in this country, he is taxable on his worldwide income.
“Are they saying that they are going to enforce it, because the law certainly covers them on that. Were they turning a blind eye to it in the past?”.”
The tax accountant, who requested on anonymity in order to explain the issue, referred Guardian Media to section 5 of the Income tax Act, which states, “Income tax shall, subject to the provisions of this Act, be payable at the rate or rates specified hereafter for each year of income upon the income of any person accruing in or derived from Trinidad and Tobago or elsewhere, and whether received in Trinidad and Tobago or not in respect of:
(a) gains or profits from farming, agriculture, forestry, fishing or other primary activity;
(b) gain or profits from operation of mines or the exploitation of natural or mineral resources;
(c) gains or profits from any other trade or business;
(d) gains or profits from the practice of any profession or vocation or management charges for the provision of personal services and technical and managerial skills; (e) gains or profits from any employment or office including pensions or emoluments...”
He said T&T’s tax laws pertaining to worldwide income apply not only to artistes, but also to sportsmen, such as cricketers who are engaged in franchise cricket around the world
Asked what would be the situation of a Trinidad resident, who has a Green Card (which allows people to work legally in the US), the tax accountant said, “That is a little more complex. If you have a Green Card, the US is taxing you and you run the risk of being double taxed.”
The expert explained that “proper” tax treaties have what is called tiebreaker rules, where the tax authorities look to see where there are the closest ties. He said T&T’s Double-Taxation Treaty with the US is from 1971 and does not have that clause.
On the issue of a T&T resident who has residency in another country, the second tax accountant told Guardian Media, “Typically, what happens is that your principal country of residence has the right to tax your income on a worldwide basis. Residency is more important than being domiciled per se.
“What happens, for example, is that if you are an expat, you might be seconded to work in a particular country for a year or two. It does not mean you have changed your domicile, but your tax residency status, which is usually by the number of days in a country, usually 183 days or half a year, is going to change because you are physically working in another location. For tax purposes, the key point is really around residency.”
Artistes or sportsmen who earn income in the US “would typically get a tax credit, under the treaty in T&T, for any US taxes paid in the US.”
The tax accountant said in some jurisdictions there is a waiver on the imposition of taxes on artistes and sportsmen because they are in foreign countries for only a short period. Even in such a case, said the tax expert, the expectation is that that income would be reported in the T&T, and the tax paid on it.
Questions were submitted to the chair of the Board of Inland Revenue on Friday, but they were unanswered up to press time.