Andrew Green, Staff ReporterTHE RADICAL overhaul of Jamaica's tax structure proposed by the Matalon Tax Policy Review Committee could see a new set of winners and losers emerging in the local economy.
Workers and the
owners of capital stand to gain income, while consumers would lose under the tax reform presented to Parliament last Tuesday. But the overall economy could be the biggest beneficiary of the proposals put forward by the Joseph M. Matalon chaired committee.
"This package would generate incremental growth of over 1.4 per cent," said committee member Eric Crawford, an accountant. He said one thing which guided the group was to develop a programme to stimulate economic efficiency and production.
Mr. Matalon was said to have been off the island late last week when The Gleaner tried to contact him.
OVERBURDENED
"Some sectors of the economy are not paying taxes while others are overburdened," Mr. Crawford said. "Income and payroll tax (in Jamaica) is about twice the level of a wide range of other countries."
In Jamaica, 41.9 per cent of overall tax is
collected from personal income and payroll tax, while indirect taxes amount to 40.5 per cent, and taxes on international trade reached 8.9 per cent.
In a survey of more than 50 countries, the average was 32.6 per cent from income and payroll tax, 47.5 per cent from indirect taxes and international trade taxes contributed 13.4 per cent.
"The committee had a concern with bringing us in line," he said. "We were looking to relieve income earners and putting the burden elsewhere."
Indirect taxes such as the general consumption tax (GCT) and special consumption tax are easier to administer and collect, he said. The poor, however, consume a greater proportion of their income and so would tend to end up paying more of these taxes.
DOUBLE THE LEVEL
To deal with this issue, the committee decided that it would be simplest to more than double the level at which people start paying income taxes to $275,184. For the poorest, it was suggested that a social fund be established to provide assistance.
"High-income earners benefit equally when you seek to help low-income earners using the tax system," he said. "That is best addressed through welfare programmes."
As a principle, it was accepted that the best environment was one where all economic activity was taxed, he said. In Jamaica's high-tax environment, where one activity is taxed and another is not, economic decision-making may be guided more by the tax consideration than the fundamental return from the activity.
