Tax on tips
The Central Government, the Minister and the Ministry of Finance in particular need to move swiftly to clear up any misunderstandings that seem sure to arise from yesterday’s announcement that a ministerial decree had been issued instructing the Inspectorate of Taxes to start charging wages tax on “tips.” (See story on page one of today’s issue of this newspaper.)
The minister did not provide detailed information about exactly how this latest ministerial decree would be executed and it certainly isn’t clear whether the decree makes a distinction between “tips” and “service charges.” We say “distinction” because in many peoples’ minds, and rightly so, there is a difference between the two.
We understand a tip to mean the payment of a gratuity or a gift of money for a service provided in appreciation for good or excellent service, the “size” of the gift often being determined by the level of customer satisfaction with the service provided, the financial means and financial health of the customer, and the extent of the customer’s tightfistedness.
While the payment of a tip is optional, there is nothing optional about the payment of a service charge. That is compulsory and wherever it is applied it is usually a clearly stated percentage of the customer’s bill. However, from all indications there seems to be no standardised practice governing the disposition of the service charge. Some establishments reportedly retain some or most – if not all – of it as revenue to be used to help them meet their overhead, while some distribute it amongst their workers.
In these circumstances, exactly how the wages tax would be applied to either the service charge or the tips is the sort of information the public has a right to know and should have been advised about long before the issuing of any ministerial decree. A measure such as this that is likely to affect workers in the pocketbook shouldn’t just be sprung on them like a bolt from the blue. No manual on good governance would so advise. We therefore hope that the minister and her ministry will move swiftly to avoid confusion and will proffer a full explanation, lest the public begin to smell a rat even if there is no rat around.
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