Jamaica Inn Ltd v The Commissioner General Tax Administration Jamaica
| Jurisdiction | Jamaica |
| Judge | C. Barnaby, J |
| Judgment Date | 22 October 2021 |
| Court | Supreme Court (Jamaica) |
| Docket Number | APPEAL NO. 2021 RV 00003 |
[2021] JMRC 5
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
APPEAL NO. 2021 RV 00003
Ransford Braham Q.C. and Carrisa Mears instructed by Braham Legal, Attorneys-at-Law for the Appellant.
Cecilia Chapman-Daley and Gabrielle Warren, Attorneys-at-Law for the Respondent.
Revenue Law — Education Tax — Education Tax Act — Section 5(1)(c)(ix) Income Tax Act — Paths to Employer's liability for Education Tax — Applicability of common law principles in determining whether a contract of service exists in determining liability for Education Tax.
The Appellant is the operator of a resort and a facility called Ocean Spa (hereinafter called “the Spa”), which is located at the resort. By way of Notice to Employers of Outstanding Tax issued on 25 th October 2017, the Appellant was advised of a balance owed by it to the Respondent for PAYE and Education Tax for the year 2015. This additional assessment follows the Respondent's decision to classify the spa service providers engaged at the Spa as employees of the Appellant who were liable to be taxed on their emoluments, which tax was to be deducted by the employer and remitted to the Respondent. Following the objection process, the Respondent confirmed its decision to classify the spa service providers as employees but tax liability was revised downward.
The Appellant appealed against the Respondent's decision to the Revenue Appeals Division (RAD) which dismissed the appeal. It was found, so far as is relevant, that the spa service providers were engaged under contracts of service. The revised assessment for PAYE and Education Tax were accordingly confirmed.
Any dispute in respect of the revised PAYE assessment was otherwise resolved. The Appellant only appeals the decision of the RAD in respect of the revised assessment to Education Tax in the amount of three hundred and seventy-two thousand one hundred and sixty-eight dollars and sixty-two cents ($372,168.62). Whether or not the spa service providers were engaged under contracts of service or contracts for service retains its place at the core of the dispute.
While I disagree with the approach taken by the RAD in determining the matter, I have nevertheless found that its classification of the contract between the Appellant and the spa service providers as a contract of service is correct. For reasons which appear below, the appeal is dismissed and the decision of the RAD confirmed.
In determining whether or not the spa service providers were engaged under contracts of service and the appropriate approach to the enquiry, it is important to have regard to who and what may be liable for Education Tax.
Section 4 (1) of the Education Tax Act (hereinafter called the “ETA”) provides that subject to section 6, Education Tax is payable by taxpayers. A “taxpayer”, pursuant to section 2 “…means any employed person, self-employed person or domestic worker and any employer who is required to pay tax pursuant to this Act”. The classes of taxpayers identified in the provision are also defined at section 2 of the ETA thus:
“domestic worker” means a person employed otherwise than for the purposes of a trade or business for the comfort or convenience of a member of a household or in or about a dwelling house or such other premises as may be prescribed in such capacities as housekeeper, cook, maid (including children's maid), laundress, butler, general helper, gardener, chauffeur or other similar capacity;
“employed person” means a person over the age of eighteen and under retirement age gainfully occupied in employment specified in the First Schedule and earning not less than the minimum wage as prescribed under the Minimum Wage Act;
“employer” means any person who has in his employment a person who is required to pay education tax pursuant to this Act;
“self-employed person” means, subject to section 3, a person gainfully occupied in Jamaica who, in relation to that occupation, is not an employed person; …
Among other things which are not immediately relevant, “gainful employment”, pursuant to paragraph 1 of the First Schedule to the Act includes “[e]employment in Jamaica under any contract of service or apprenticeship, written or oral, and whether express or implied.” [Emphasis added].
For its part, section 6 of the ETA imposes an obligation on an employer to pay education tax due from employed persons. In addition to the “employer's tax” paid in respect of his employee, the employer on behalf of and to the exclusion of the employee is also required to pay the tax to which the employee is liable under the Act. In that regard the employer is permitted to deduct, subject to and in accordance with the regulations and not otherwise, the education tax which has been or is to be paid on behalf of the employee from his pecuniary remuneration.
The Education Tax Regulations found in the Second Schedule to the ETA provides as follows at regulation 2,
Subject to the provisions of this Act and these Regulations, education tax shall be paid-
(a) by such taxpayers as are specified in the first column of the Appendix (hereinafter referred to as “specified taxpayer”) in accordance with the rates specified respectively in the second column of the Appendix; and
(b) by taxpayers, being employers, in accordance with the rates specified by reference to specified taxpayers respectively, in the third column of that Appendix.
It suffices to say that the Appendix provides for two broad classes of “specified taxpayers”. Employed and self-employed persons. For the employed person Education Tax is generally, and certainly so far as is relevant here, charged as a percentage of that person's “emoluments”. Both an employee and employer portion are paid as Education Tax.
On the other hand, self-employed persons who are not disqualified from being charged Education Tax on account that they earn below the weekly minimum wage under the Minimum Wage Act, are liable to the tax which is charged as a percentage of their “earnings”. There being no employer in such a situation, there is no obligation for payment of the Tax by an employer.
“Emoluments” is defined at section 2 of the ETA to mean
… any emoluments assessable to income tax pursuant to paragraph (c) of section 5 of the Income Tax Act (other than annuities, pensions, superannuation or other allowances payable in respect of past services in any office or employment of profit and such other categories of emoluments as may be prescribed) being emoluments from which income tax is deductible pursuant to the Income Tax (Employments) Regulations, whether or not tax in fact falls to be deducted therefrom; …
[Emphasis added]
It appears to me that by including the words emphasized in the definition of “emoluments” under the ETA, and in providing that tax” means the education tax imposed by this Act and includes all penalty and interest that are or may be added to a tax under this Act’, the legislature created two (2) distinct paths to education tax liability for one who engages the of profit services of another. They are:
For convenience only, I will address the paths to liability in reverse order.
-
(i) As an employer of an employed person under a contract of service or apprenticeship; or
-
(ii) As “the employer” of “the employee” who provides “personal services” in accordance with section 5 (1) (c) (ix) of the ITA.
So far as is relevant, section 5 (1) (c) of the ITA prescribes that
Income tax shall, subject to the provisions of this Act, be payable by every person at the rate or rates specified hereafter for each year of assessment in respect of all income, profits or gains respectively described hereunder -
(a) …
(b) …
(c) all emoluments, whether in the form of cash, benefit or kind, arising or accruing to any person or any member of his family or household by reason of his office or employment of profit, including the full cost of providing the benefit or kind (such as a rent, uniform or laundry allowance):
Provided that -
(i)…
(ix) where under the terms of a contract or arrangement any Person (hereinafter in this section called “the employee”) is under an obligation to render personal services to another person (hereinafter in this section called “the employer”) whether on his own behalf or on behalf of a company, and -
(A) the employee is subject to, or to the right of, supervision, direction or control by the employer as to the manner in which he renders those services; and
(B) the remuneration for the services would not, apart from this paragraph, be treated as emoluments,
then the relevant services shall be treated as duties of an office or employment of profit held by the employee and the income arising or accruing therefrom shall be treated as emoluments of that office or employment, and accordingly, the employer shall deduct from the remuneration the income tax payable.
The other provisos at paragraph (c) are not relevant to the instant enquiry but generally provide, whether by way of exception or inclusion, how “emoluments” are determined in particular circumstances. To the extent relevant, section 2 of the ITA also provides that
“ emoluments” includes, in relation to any office or employment of profit -
(a) all salaries, fees, wages, all provision or payment, as the case may be, in respect of living or other accommodation, entertainment, utilities, domestic or other services and other benefits, perquisites and facilities whatsoever (whether or not similar to any of the foregoing and whether in money or otherwise); and
(b) without prejudice...
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