TO PAY OR NOT TO PAY, THAT IS THE QUESTION
by Malcolm Chambers, CPFA, Chambers Accounting Limited
current year basis, is still subject to States approval. By the time my comments are read, however, I expect that approval would have been given, and all previously prior year basis taxpayers will have received a letter detailing what that means for them, including the suspended amount they owe in unpaid tax for 2019 and the options available to them to clear that debt.
A
Judging by the questions I am already receiving from my clients as to what I think they should do about clearing their debt, the clear choice appears to range between “I am in a position to pay off the debt now so should I just pay it in one go?” and “I can’t afford to pay now but how many years do you think I should pay it over?”
Let us assume that your tax debt, as notified, is the
t the time of writing this article the Treasury Minister’s proposal that all Island taxpayers should from now on pay their income tax on a
sum of £12,000 and you wish to choose between paying now or paying in equal annual instalments of £1,000 a year over ten years. Now, everyone has a reasonable knowledge of the rate of inflation and most will know the effect that has on the future value of money, such that a pound now is worth more than a pound in a year’s time. This concept has been used in decisions on business investment since the time of the Industrial Revolution.
Let us examine in detail exactly what that means for a decision to pay now, or over time, using the figures in this example. To do this we also need to make an assumption about the rate of inflation that we would expect over the next ten years, and for the purposes of this example let us assume an annual inflation rate of 4%, which is approximately the actual average annual increase in the Retail Prices Index in Jersey over the last twenty years so it is not unreasonable to use that figure for the purposes of this exercise. There is just one more variable in this exercise, and
Page 32
Beyond 20/20 - Finance
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100
