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Dr. Omar Davies, Minister of Finance and Planning, will make known his timetable for implementing the tax threshold increase next April.

Camilo Thame, Business Reporter

An estimated 31,000 Jamaicans, who would have been free from income tax if the government had kept its January 1 deadline to raise the threshold by 42 per cent, will have to wait at least four months for Finance Minister Dr. Omar Davies to pronounce on when they can cash in on the benefit.

Additionally, the net addition to payslips - calculated by Sunday Business at $1,700 monthly - that would have accrued to salaried workers earning above $275,000 per annum is in abeyance.

The Finance Ministry on Friday advised that its new timetable for a slate of changes to the tax regime to effect the increase in non-taxable income to $275,000 would be made public in the new fiscal year.

"An announcement as regards a new timetable for implementation will be made in the budget presentation for 2007-2008," said the Finance Ministry's press release in response to The Gleaner's story revealing the delay.

The ministry said it is yet to have consultations with the trade unions, which were to precede the increase in the threshold. Those talks would allow unions to properly advise their members of other changes in the tax regime that increasing the income tax threshold would have impacted, including the elimination of several benefit schemes such as the hotel gratuity scheme, the productivity incentive scheme and the accommodation allowance scheme.

Financial impact

Those eliminations according to the ministry would be critical to mitigating the financial impact of the threshold hike on tax flows to the central government's coffers.

"Raising the threshold without the corresponding adjustments to allowances would have a significant impact on revenues," said the press statement. "As a result, implementation of all changes will be delayed until the required consultations have taken place.

The proposed tax threshold hike to just over $275,000 and thereafter indexing future movement to inflation was among a raft of tax reform recommendations in a 2004 report by a committee commissioned by Davies and chaired by businessman Joseph M. Matalon. At the time, the tax threshold stood at $120,423.

Davies, who accepted the recommendations, promised to achieve the new threshold in three changes over 18 months.

The first movement to $169,104 was in July 2005, which scrubbed off 54,600 persons from the income tax list, followed by a rise to $193,440 in January 2006, which dropped another 12,100 off.

In 2004, Matalon's committee had estimated that 98,000 taxpayers would have benefited from "total income tax relief" by the move, and that it would have costed the Government $5.5 billion.

The changes that took effect in 2005-2006 fiscal year was initially estimated to cost $1.5 billion, but in the memorandum to the budget for the current fiscal year, the Finance Ministry indicated that "higher revenue loss from increasing the income tax threshold than the tax measure had originally projected, due in part to a partial implementation of the measure to remove tax exempt status from some allowances was not implemented."

- camilo.thame@gleanerjm.com