A MOVE by the In-Land Revenue Division of the Ministry of Finance and Treasury to force companies to clear their corporate tax arrears before their new payments are accepted, is believed to have severely affected the government’s financial woes.
Companies with arrears are said to have been locked out from the tax payment system. This means the IRD is not receiving new payments unless the defaulters have cleared their arrears.
“It is not that these companies with arrears are refusing to pay. They are paying but because their names are in the old payment system, which is not in use anymore, new corporate payments cannot be loaded into the new system,” sources spoken to separately told Solomon Star over the weekend.
Only ICT officers have access to the old AX system, which puts the “stop payments” on receipt of payments from companies with arrears.
Some State-Owned Enterprises (SOE) companies are amongst the firms that owe the IRD large arrears.
“There is a backlog of payments, (believed to be in tens of millions of dollars), waiting to be paid to the government. But until the IRD has come up with a solution to address this, there is no way forward, the sources said.
It is not clear when the move, described as a “circuit breaker” was introduced. It is also unclear whether a timeframe is given for addressing the arrears.
Many say the impact of the COVID-19 pandemic forced many companies to shift their focus to addressing the unfolding health disaster, putting on hold payment of their various taxes.
As a result, the arrears have ballooned over time, forcing IRD to come up with a measure to address the problem. It is unclear how much is owed the government in corporate tax arrears.
“Unless the IRD has come up with a solution on the way forward, there will be no moving forward,” the sources said.
Solomon Star was unable to get a comment from the IRD
Meanwhile, it has been revealed that employee contributions to the Solomon Islands National Provident has fallen way behind.
This is because SINPF inspectors have not been up to date with their work.
Besides employee contribution, employers are required by law to contribute an additional 7.5 per cent on behalf of each of their employees, bringing the total contribution to 12.5 per cent per employee.
This means for every dollar earned, 5 cents is deducted from the employee and 7.5 cents is contributed by the employer.
By Alfred Sasako
