The bulk of the Government's stimulus package to cushion the blow from a global financial downturn to crucial sectors of the Jamaican economy takes effect today.

Top of the list is a break for wage earners who will pay less for income tax effective today.

The annual income-tax threshold will be increased from $196,872 to $220,272, providing moderate relief for low-income earners. This means that persons earning less than $4,236 per week will not pay tax on income. Individuals earning above that amount will receive an additional $450 in tax-free income each week.

The troubled tourism sector also gets a break starting today, with the hotels having their general consumption tax (GCT) halved to 4.125 per cent, down from 8.25 per cent.

This will be for a period of six months and should give the hotels, particularly small-scale properties, breathing space at a time when indicators suggest that the industry is facing a gathering storm.

Manufacturing benefits

There is also good news for the manufacturing sector, which will see the customs user fees payable on capital goods and raw materials removed. The time allowed for depreciating the cost of capital equipment will be reduced from two years to one year.

Almost 3,000 small businesses will also get a tax break effective today in the form of a GCT waiver.

Previously, all businesses with annual sales above $1 million were required to register for GCT purposes and submit monthly returns.

Starting today, only businesses with annual sales exceeding $3 million will be subject to GCT requirements.

The tax on dividends paid by all locally owned companies will also be eliminated, effective today, as part of efforts by the Government to protect the jobs of workers and encourage private-sector stakeholders to boost investments.

This comes almost six years after the tax on dividends paid by the approximately 60 companies listed on the stock exchange was abolished while all other companies were required to withhold tax on dividends paid.

1.5% off transfer tax

The transfer tax on property transactions has also been lowered by 1.5 per cent.

Last April, the Government reduced the transfer tax from 7 1/2 per cent to 6 1/2 per cent. The further reduction is to provide stimulus to the real-estate and construction sectors, which have suffered a downswing for most of last year.

Private mortgage lenders such as building societies have also got a break. They will be able to carry more non-performing loans on their books.

Strict regulations limit the number of non-performing loans which these mortgage lenders are allowed to carry. Up to yesterday, they were required to report to the regulatory authorities any loan that was not serviced for 90 days.

Mortgage ease

However, under the relaxed rules that take effect today, mortgage lenders will have 180 days before they have to book non-performing loans.

This should give building societies more time to work out payment plans with persons who might fall on hard times and are unable to service their mortgages.

On the negative side, the duty-free arrangement for inbound barrels and packages of personal items with value exceeding US$3,000 (J$240,000) ended yesterday. Such goods will now attract the full duty.

The new measures are expected to cut the Government's revenue for the rest of this fiscal year by $778 million.