Matalon
Robert Hart, Parliamentary Reporter
DR. OMAR Davies, minister of finance and planning, said yesterday that it was highly unlikely the government would support all the recommendations of the Joseph M. Matalon-led Tax Policy Review Committee.
Dr. Davies pointed to the major recommendations, that the income tax threshold be increased by 128 per cent and general consumption tax (GCT) be increased by one per cent, as key areas the government will have to examine carefully.
"From an accounting perspective, it is an eminently sensible proposal which is to put greater emphasis on consumption and then provide workers with a higher threshold," Dr. Davies told yesterday's sitting of a special parliamentary committee to preview the 2005/ 2006 budget.
INCOME TAX RELIEF
If the Matalon Committee's recommendations were accepted, the tax threshold would be raised to $275,184 and provide total income tax relief to an estimated 98,000 persons.
But at the same time, to compensate for the government's revenue losses, there would also be a reduction in the number of tax-free items as well as an increase in GCT to 16 per cent.
Dr. Davies said: "The problem is that for those at the bottom of the economic ladder, a raise in the tax threshold is of no particular benefit and the removal of the exemption, crudely put, means that their total income would be taxed because anything they purchase would be captured."
He added: "If we don't adopt the proposals in total, it must be understood that there is a good reason. It is just that those at the bottom of the economic ladder could be punished by raising the threshold but (instead) putting it on the GCT."
