Janet Silvera, Senior Tourism Writer

WESTERN BUREAU: A proposal by the Joseph A. Matalon-led Tax Policy Review Committee to remove tax exemption from gratuity now enjoyed by hotel workers, has been rejected by the Jamaica Hotel and Tourist Association (JHTA).

"This would be a major impediment in the remuneration for tourism workers and a retrograde step for the Government, if approved," JHTA president Horace Peterkin told The Sunday Gleaner. Mr. Peterkin said that at a time when the rest of the world was moving towards performance incentive schemes, the removal of tax exemption for gratuity could only serve to demotivate the thousands of workers employed to the island's most critical export industry. "An export industry that needs to be treated as such," he noted.

The Matalon proposal, in tandem with the increase in threshold on income tax, proposes an overhaul of the tourism sector's general consumption tax regime, the elimination of the hotel gratuity scheme, and changes to the productivity incentive scheme, among other things.

Currently, for the majority of the workers in the hotel industry, gratuity accounts for more than 50 per cent of their take-home pay. As a result, financial experts are predicting that this would create havoc.

"It means these people would have to pay $58,000 in taxes on $200,000 of gratuity earned," explained Joseph Hilton, immediate past president of Hospitality, Financial and Technology Professionals. Mr. Hilton, who is also director of finance at the Rose Hall Resort and Country Club, said the people that the decision would affect most are the ones on the lowest rung of the employment ladder.

Retrograde Step

For several years, the island's trade unions fought vigorously to get tax-exempt status for gratuity. One of the persons who won the battle, Clive Dobson, immediate past president of the National Workers' Union, agreed yesterday that removal of the benefit would be a retrograde step.

However, he suggested auditing of the gratuity system in the hotel industry. "There is nothing to determine whether or not the employees are getting their fair share, or the level of income to the hotel itself."

Meanwhile, a highly placed source indicated that the Government has taken no such decision. "The matter has been raised in the report, which is part of the proposal to raise the threshold, but no decision has been made by Cabinet and, therefore, it remains a proposal," said the source.