Jamaica finance minister eyeing abolition of income tax
TREASURE BEACH, St Elizabeth — Finance Minister Audley Shaw says that, if all goes well, personal income tax could be a thing of the past for Jamaicans within five years.
“It is yes,” said Shaw when asked the direct question on Saturday night as to whether his phased $1.5-million income tax initiative to bring tax relief to lower- and middle-income earners could be the beginning of the end for the tax type.
“Yes, it is quite possible that in the medium term we could see complete abolition of personal income taxes,” he added.
“We (Jamaicans) are going to have to move progressively towards more and more indirect taxes that tend to be more all-inclusive and tend to avoid the opportunities for tax avoidance and tax evasion,” the finance minister said.
He was responding to questions from journalists following an address to a Jamaica Labour Party fund-raiser for the Pedro Plains Division. It was his first presentation since his budget speech in Parliament on Thursday in which he outlined strategies to implement the income tax relief campaign promise, and also a tax package involving indirect consumption taxes to meet a more than $12-billion budgetary gap created by the income tax plan.
Pressed to define “medium term”, Shaw said, “it could be five years”.
Shaw said much would depend on the approach taken by Government and the people between now and then.
“It all depends on the efficiency and comprehensiveness with which we approach tax reform and the deliberateness of it and, of course, to get that buy-in so people understand it and work towards it,” he said.
Shaw cautioned that the effect on the most vulnerable in the society and the need to offer protection to those people would affect the decision.
“It can’t be done overnight; for instance, in [the case of] GCT (General Consumption Tax), where you have in the population people who are compromised, you can’t just go and slap GCT on basic foods. And if you put GCT on foods, then you have to go to a lower rate to ensure adequate protection in terms of a social programme to protect those at the vulnerable level. So these are things that require due diligence to sort out…” he said.
He argued that moving towards a simpler tax system without personal income tax would make it harder for those bent on tax avoidance and tax evasion.
“Believe it or not, right now we have over $50 billion, when you add interest to it, $70 billion in arrears, including PAYE arrears. If you move towards indirect taxes that are immediate … fuel taxes, departure taxes — these are immediate — the compliance rate is 100 per cent, (so) those are the directions we are looking at,” he said.
Last Thursday, in Parliament, Shaw announced that the income tax election campaign promise will be implemented over two financial years, rather than April this year as was initially promised. Shaw said the Government had listened to criticisms from a number of sectors in streamlining and amending the original proposal. He said that more than a quarter-million Jamaicans will now benefit from income tax relief rather than 118 000 originally envisaged.
To meet the budgetary gap, additional and new consumption revenue measures have been applied to petrol, liquefied natural gas, heavy fuels, tobacco products, and departure taxes to raise more than $13 billion. (Jamaica Observer)