Anitha Cross.
February 21, 2025
The importance of being tax-compliant
A non-negotiable for MSMEs in Jamaica
TAX compliance is more than just a legal obligation — it is the cornerstone of building a financially sound business and establishing a strong reputation. For micro, small, and medium-sized enterprises (MSMEs) in Jamaica, staying tax-compliant is critical to ensuring smooth operations, avoiding financial penalties, and fostering trust among stakeholders.
In simple terms, tax compliance means ensuring that all tax returns are filed on time and all payments are made as required. While the process can seem intimidating for first-time filers or small business owners, it is vital for long-term success. Here are three key reasons why tax compliance is essential for your business:
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1) Avoiding Unnecessary Penalties
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Tax non-compliance comes with significant financial risks. According to Tax Administration Jamaica (TAJ), late filing of income tax returns incurs a penalty of $5,000 per month, capped at $1 million. Additionally, unpaid taxes attract interest rates of 16.62 per cent for income tax and education tax, and 20 per cent for National Housing Trust (NHT) and National Insurance Scheme (NIS) contributions. These interest charges are applied to the outstanding amount until it is fully settled.
If TAJ assesses your company, an additional penalty of up to 50 per cent can be imposed on unpaid taxes. Such unexpected financial burdens can severely impact your cash flow and hinder your ability to operate effectively. Worse yet, consistent non-compliance could lead to legal action, including asset seizure — causing irreversible damage to your business.
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2) Enhancing Your Reputation
A tax-compliant business signals trustworthiness and integrity to customers, suppliers, and investors alike. Compliance demonstrates financial stability and credibility, making your business more attractive to potential partners and investors. It also fosters confidence among stakeholders who view your organisation as a reliable entity contributing to national development.
Moreover, many financial institutions require proof of tax compliance when assessing applications for credit facilities such as loans or business credit cards. Without a tax compliance certificate (TCC), accessing financing opportunities becomes significantly more challenging.
3) Unlocking Financing Opportunities
At National Commercial Bank Jamaica Limited (NCB), we understand the importance of supporting MSMEs in achieving their growth goals.
• Through partnerships with the Development Bank of Jamaica (DBJ), we offer loan guarantees covering 80-90 per cent of financing needs. However, tax compliance plays a critical role in risk assessments for these guarantees.
• NCB Business Credit Cards, which offer convenient access to revolving credit, can help business owners manage cash flow, cover operational expenses to include your tax payments, and take advantage of opportunities as they arise.
• NCB Merchant Advance Credit Facility allows SME card merchants to access unsecured financing based on future debit and credit card settlements, which can be ideal for securing working capital and business expansion.
These tailored financing options are designed to empower MSMEs by providing accessible and flexible financial support to help them grow and succeed. Businesses seeking financing may be required to present a TCC as part of their application process. Falling off the “tax compliance bandwagon” can complicate access to these opportunities but that does not mean the door is permanently closed.
At NCB, we adopt a supportive approach that starts with us working closely with MSMEs, so that we can understand and support them with their financial obligations.
Tax Avoidance vs Tax Evasion
It is important to distinguish between tax avoidance — using legal methods to reduce tax liabilities — and tax evasion, which involves illegal practices to avoid paying taxes altogether. Businesses committed to growth and sustainability must demonstrate their contribution to national development by fulfilling their tax obligations transparently.
Tax revenues are a primary source of income for the Government, and is used to fund essential services, including health care, education, and infrastructure improvements. By meeting your tax obligations, you help build a stronger economy and a better future for all Jamaicans.
Advice for Businesses Struggling with Compliance
If your business has fallen behind on its tax obligations, the key is to act quickly and seek guidance on how to get back on track. At NCB, we do not reject businesses outright for past non-compliance. Instead, we work collaboratively with MSMEs to explore solutions that align with their needs while encouraging them to prioritise compliance moving forward.
Tax compliance is non-negotiable for any business looking to thrive in today’s competitive environment. Beyond avoiding penalties and legal risks, it builds a solid foundation for growth by enhancing your reputation and unlocking financing opportunities that can propel your business forward.
At NCB, we remain committed to supporting MSMEs through financial literacy initiatives and innovative solutions designed to help you grow your business sustainably—because your success is our priority. Look out for our next article in this series, where we will look closer at specific financial solutions designed to help you maximise the benefits for your business.
Anitha Cross is the Product and Portfolio Manager — Card Issuing, National Commercial Bank Jamaica Limited
