Government will postpone the planned January 1 implementation of a 42 per cent hike in the income tax threshold, which would have pushed the level at which Jamaicans begin to pay tax on their yearly incomes to a little over $275,000.

Financial Secretary Colin Bullock confirmed yesterday that the new threshold would not be implemented at the start of the year as promised by Dr. Omar Davies, Minister of Finance and Planning, during his 2005/2006 Budget Debate presentation.

Dr. Davies was, however, unavailable for comment and there was no indication how long the delay would last.

"For now I can say that it cannot be on for January," Mr. Bullock told The Gleaner. "No definitive decision has been taken (for the new threshold to be implemented). I don't think anything has gone to the Cabinet to make a definitive decision."

Necessary documentation incomplete

Bullock blamed the delay in the inability of the tax authorities to complete the necessary documentation for the shift as well as the failure of the Finance Ministry to sensitise people about a concomitant removal of certain tax allowances if the hike in the threshold is to be revenue-neutral.

The proposal for raising the income tax threshold to a little over $275,000 and indexing future movements to inflation was among a raft of tax reform recommendations in a 2004 report by a committee that was chaired by businessman Joseph M. Matalon. At the time, Jamaicans paid income tax after they had earned $120,464 a year. The Matalon plan also called for the removal of allowances workers can get for accommodation (rent) expenses as well as to exempt hotel industry workers who receive gratuities.

While Dr. Davies accepted the recommendations, he promised to achieve it in three chances over 18 months: The first movement to $169,104 in July 2005, followed by a rise to $193,440 in January this year. The January 2007 hike and thereafter pegging future hikes to inflation was to have been the final one.

But Bullock suggested that the necessary preparatory work has not yet been done. "For it to be revenue-neutral, it would have to be accompanied by the removal of some allowances," he explained yesterday. "There would have to be the appropriate sensitisation and that has not been done."