Andrew Green, Staff Reporter
JAMAICA'S overburdened taxpayers could start to get some relief before the current financial year is out.
Pressured by the Jamaican private sector and the International Monetary Fund (IMF), Finance and Planning Minister Dr. Omar Davies last year established a Tax Policy Review Committee to suggest improvements to the country's creaking tax system. This innocuous sounding committee is likely to have a profound effect on the life of every Jamaican.
"It is going to influence the tax policy probably for the next decade or more," said Keith Collister, business development manager for First Global Stockbrokers. "I expect it will bring a fairer tax system."
YEARS SINCE LAST REVIEW
It has been 15 years since Jamaica last reviewed its tax system, Dr. Davies said at a Finance Ministry press conference on Friday. The last review resulted in the reduction of personal income tax rates to 25 per cent, streamlining corporate taxes and the introduction of the General Consumption Tax (GCT). With the modifications made to the tax system since, "It is really now a maze," Dr. Davies said. "If you look at the incentives granted to businesses it is now so complex that each has become a unique case study and we need to move beyond that."
This is why the Tax Policy Review Committee was established a year ago under the chairmanship of businessman, Joseph M. Matalon. The committee has representatives from the private sector, trade unions, the accounting profession and ordinary citizens. The committee's work is being assisted with technical analysis provided by a team from the Georgia Institute of Technology led by Professor Roy Bahl. Dr. Davies said Professor Bahl carried out similar work for the last tax review committee, which was chaired by Roy Collister.
"The present tax system costs the employees, companies and the economy," said economist Dr. Omri Evans, as Jamaicans are not only heavily taxed, but the taxes are complex and difficult to administer.
GOV'T SHOULD SIMPLIFY SYSTEM
In a 2002 Staff Monitored Programme report, the IMF suggested that the Jamaican Government simplify its tax system. It urged that the Education Tax, the National Insurance Scheme, as well as National Housing Trust and Human Employment and Resource Training (HEART) Trust contributions be merged into the Income Tax to reduce the administrative burden on taxpayers.
"If you roll those into one tax, it would mean less administrative time and cost for employers," Dr. Davies said. "There is a big saving there."
By streamlining the system and lowering the overall corporate tax rate, "you could have more people in the informal system formalising," Dr. Evans said. The Government would not necessarily lose any revenue as there would be a larger number of taxpayers.
"The most striking inequity is the burden on PAYE (Pay As You Earn) taxpayers," Mr. Collister said. Only half the potential taxpayers are in the PAYE system, but up to January of the last financial year, they contributed $22 billion in income taxes, while the rest contributed $899 million.
"I believe the Government will welcome a reduction PAYE as long as revenue comes from somewhere else," Mr. Collister said.
The only instruction given to the Tax Policy Review Committee is that their recommendations must be "revenue neutral," Dr. Davies said. "It is not a way to get more taxes."
The first Committee recommendations were to have been submitted last week and the final report will be made in October.
