By Robert Hart, Staff ReporterDR. OMAR Davies, Minister of Finance and Planning, has rejected the proposals for amendments to the tax system contained in the draft social partnership agreement developed by the private sector-led Partnership for Progress.
Minister Davies told The Gleaner yesterday that the Government would not be willing to consider the Partnership's draft proposals which include the raising of the tax threshold, from $120,432 to $160,568, as well as an increase of General Consumption Tax (GCT) to 18 per cent at the ports.
"The Government's position is that it would not make sense to look at this (tax change) through a piecemeal approach," Dr. Davies said. He explained that, with a committee already in the process of examining the tax system, the Government will instead await its report before taking any action.
COMMITTEE TO SUBMIT FINAL REPORT
The 12-member Tax Policy Review Committee, chaired by businessman Joseph M. Matalon, met first in July 2003 and is expected to submit its final report to the Finance Ministry in October.
Among other issues, the committee is examining the impact of the current rates of Personal Income Tax, Corporate Income Tax and General Consumption Tax on incentives for work, investment and economic growth in general. It is also looking into the impact on poverty and the equitable distribution of the tax burden.
NEED FOR AMENDMENTS
Despite acknowledging the work of the Tax Policy Review Committee, Partnership for Proress has insisted that there is need for immediate tax amendments. "The Government of Jamaica and the Partnership acknowledge that the work of that (tax policy) committee should not be pre-empted," the draft social partnership agreement states.
"Nonetheless, the Partnership has re-viewed aspects of the existing tax system that it believes need immediate attention in the context of the public sector wage agreements." It adds: "(The) proposals are aimed at allowing some of the burden to be shifted off the PAYE wage earners."
According to the Partnership the proposed increase in the tax threshold would cost Govern-ment $2.17 billion, a net cost that would be reduced by $100 million through increases in GCT. "Replacement revenue should be earned through widening the tax base and bringing in tax from the non-compliant informal economy," the Partnership said.
The proposed increase in GCT at the wharves would relate to input taxes. As a result, the Partnership has argued, gross additional taxes would be raised by $2.8 billion. With 30 per cent of those taxes being claimed back by legitimate importers, the real increase in additional revenue would be $2 billion.
With the last comprehensive tax review taking place in the 1980s, Dr. Davies has said that the system must be updated to simplify the tax arrangement.
The private sector-led Partnership for Progress aims to build a social partnership to ensure that Jamaica's socio-economic climate improves through a combination of public expenditure cuts, wage restraint and tax reform.
