Davies
Dennise Williams, Staff Reporter
IN CONTRAST to two years ago, the general feeling in the marketplace is one of cautious calm in relation to the upcoming budget. No one argues that the country must manage the heavy debt burden while providing for the vital social services such as education, security and fire services - a very intricate balancing act.
But perhaps it is the acknow-ledged political aspirations of certain players and the understanding that investor confidence is key to any economic model that have given the market a sense that this year's budget will not have any draconian surprises.
In fact, some believe that any tax measures will be subtle and easily digested by the populace, thus ensuring a smooth continuum of the current goodwill that the Jamaican marketplace is enjoying.
HEAVY PUNCHES
Financial analyst and lecturer Karen FitzRitson states, "One thing we can be assured of is that Dr. Omar Davies, Minister of Finance and Planning, will not be giving us any surprises or throw heavy punches as over the past four years what he has stated as his objectives, he has created the vehicles to execute these actions, such as consistently reducing inflation rates and the level of interest rates."
However, there is still some trepidation concerning what exactly will happen when Dr. Davies makes his presentation.
Orville Johnson, chairman of Today's Money says, "The market is concerned about making fiscal deficit targets. Whether the Government is able to meet them will impact interest rates and investor confidence. It is accepted that the country had a setback because of Hurricane Ivan. But people want the Government to hit the targets as close to possible. So there is that anxiety."
Mr. Johnson also highlights the fact that "there are concerns of off-budget items, such as the cost of Air Jamaica going forward. People want to know what it will cost to keep the airline afloat and if it will impact this year's budget, or will be put off until next year's budget."
And then there is the question of where the money is going to come from to finance the country's debt and its expenditures. Mr. Johnson believes that the fuel tax is one that should be avoided. "Fuel tax is a difficult one because of how it relates to the fuel price. It is already high at the pump, and one cannot fathom how one could look at increasing that price anymore."
Ms. FitzRitson continues on that theme with, "Dr. Davies has promised that he wants to deliver a balanced budget this year, therefore I look forward to see how he will be addressing matters such as the increased gap in the balance of trade and the growing internal and external debt that we have incurred to date. Many fear that the solutions will be extrapolated from the Matalon's Tax Policy Review."
TRANSFER TAX
There is at least one sector that does wish for a few of the Matalon Tax Recommendations to be implemented. The real estate industry has taken a great interest in calls for the reduction of transfer tax and the elimination of stamp duty.
Debra Cummings, lead broker at Century 21 Heave Ho Properties, informed the Financial Gleaner that, "I believe in the Matalon tax proposal. We, the members of the real estate association, worked with them in crafting the suggestion to make changes that impact on our industry. Essentially, there is too much bureaucracy and transaction costs as things stand now. We suggest a capital gains tax on profits made in real estate transactions instead of transfer and stamp duty. Government would collect more in taxes and investors would benefit from a reduced transaction time. Remember that time is money.
"Also, the Government would come out ahead because the number of people needed to administer the management of a sale in the Title Office and Stamp office would not be needed and that represents savings."
Yet, it is not just about one sector, as each industry has its own wants and fears. For the stock market, there is the concern that if the market does not like what is presented in the stock market, it will depress share prices.
According to Vernon James, senior manager for stock brokerage at Dehring, Bunting & Golding, "It is likely that they will come up with something to capture the informal sector. I don't think they will be coming with anything draconian because the investing community is wary. I think they will do something subtle this year. Especially since this is a year that certain political aspirants are vying for president of the PNP."
And Mr. Johnson states, "It is not surprising that the stock market is in decline. There is a bit of a wait and see. One wants to see if the budget is investor-friendly."
Looking at the big picture, Ms. FitzRitson stated, "I, however, look forward to see how the creation of new economic opportunities will be addressed as there are clear signals of investor interest growing in Jamaica, supported by continuous activities in the construction sector. Therefore, draconian methods would not be prudent at this time in light of renewed interest in our economy. This needs to be a period of creative thinking and sound strategies to continuously propel economic prosperity."
