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Cabinet to decide on tax package today
Wednesday, April 22, 2009
The finance ministry still has a "massive hole" to fill in the 2009/2010 budget and up to this morning had yet to decide how it will plug the gap.
Audley Shaw
Government sources told the Business Observer yesterday that there is no plan to borrow and the focus will be on "widening the tax net".
This, however, includes what the source described as examining the possibility of recouping taxes from consumer goods, pointing to adjustments to the general consumption tax (GCT). Although, based on the wording used by the source, it may involve eliminating items that are currently exempted from the tax and others classified as zero-rated.
According to a reliable source, at one point a proposal to lower GCT while raising the income tax threshold significantly to allow for higher disposable income was on the table.
The reasoning was that the loss from raising the bar on non-taxable income would be more than compensated by a reduction in GCT. Now government officials appear to be wavering and seem unwilling to risk any shortfall in revenue.
At around 10:00 this morning, Cabinet members will convene a meeting to ultimately determine what tax package Finance Minister Audley Shaw will present in Parliament tomorrow.
A number of options are currently on the table, but sources disclosed up to late yesterday evening that the final one would be chosen today.
The package, which apparently will include a cess on gasoline, will closely follow the 2004 recommendations of the tax reform committee led by Joseph Matalon.
But that report was made to be "revenue neutral", in that it catered to streamlining a complicated and inefficient tax system rather than increasing revenue.
This year's budget, however, is $40 billion or eight per cent higher than actual expenditure the year before. That and waning tax collections have prompted the Government to opt for measures that would significantly increase intake.
For the 11 months to February, revenue collections were only 10 per cent higher than the comparative period the year before, and now estimates place the gap between estimated expenditure and projected revenue, under the current scheme of things, as high as $20 billion.
On the other hand, the Matalon Report had targeted increased revenues from broadening the base of GCT and increased SCT rates.
The intention then was that gains in revenue would have been offset by eliminating education tax and HEART taxes while reducing the corporate tax rates.
Last year, Shaw had presented a tax package that included increases to SCT on certain items, including cigarettes and imported automobiles.
But 'base broadening', according to the Matalon Report, spoke to addressing "revenue productivity and the fairness of the GCT" by eliminating all non-export zero rates other than those required by international convention, together with a significant amount of the exemption list.
Retailers and sellers of auto parts and accessories were estimated to be the largest beneficiaries of zero-rated items, receiving close to 60 per cent of the cost of revenue to the Government, while the recommendations made in 2004 suggested that the elimination of exemptions on utilities, construction and real estate, and transportation would yield considerable revenues.
The overall plan in 2004 was to recoup $12 billion in revenue based on 2002 levels.
http://www.jamaicaobserver.com/magaz..._IN_BUDGET.asp
Wednesday, April 22, 2009
The finance ministry still has a "massive hole" to fill in the 2009/2010 budget and up to this morning had yet to decide how it will plug the gap.
Audley ShawGovernment sources told the Business Observer yesterday that there is no plan to borrow and the focus will be on "widening the tax net".
This, however, includes what the source described as examining the possibility of recouping taxes from consumer goods, pointing to adjustments to the general consumption tax (GCT). Although, based on the wording used by the source, it may involve eliminating items that are currently exempted from the tax and others classified as zero-rated.
According to a reliable source, at one point a proposal to lower GCT while raising the income tax threshold significantly to allow for higher disposable income was on the table.
The reasoning was that the loss from raising the bar on non-taxable income would be more than compensated by a reduction in GCT. Now government officials appear to be wavering and seem unwilling to risk any shortfall in revenue.
At around 10:00 this morning, Cabinet members will convene a meeting to ultimately determine what tax package Finance Minister Audley Shaw will present in Parliament tomorrow.
A number of options are currently on the table, but sources disclosed up to late yesterday evening that the final one would be chosen today.
The package, which apparently will include a cess on gasoline, will closely follow the 2004 recommendations of the tax reform committee led by Joseph Matalon.
But that report was made to be "revenue neutral", in that it catered to streamlining a complicated and inefficient tax system rather than increasing revenue.
This year's budget, however, is $40 billion or eight per cent higher than actual expenditure the year before. That and waning tax collections have prompted the Government to opt for measures that would significantly increase intake.
For the 11 months to February, revenue collections were only 10 per cent higher than the comparative period the year before, and now estimates place the gap between estimated expenditure and projected revenue, under the current scheme of things, as high as $20 billion.
On the other hand, the Matalon Report had targeted increased revenues from broadening the base of GCT and increased SCT rates.
The intention then was that gains in revenue would have been offset by eliminating education tax and HEART taxes while reducing the corporate tax rates.
Last year, Shaw had presented a tax package that included increases to SCT on certain items, including cigarettes and imported automobiles.
But 'base broadening', according to the Matalon Report, spoke to addressing "revenue productivity and the fairness of the GCT" by eliminating all non-export zero rates other than those required by international convention, together with a significant amount of the exemption list.
Retailers and sellers of auto parts and accessories were estimated to be the largest beneficiaries of zero-rated items, receiving close to 60 per cent of the cost of revenue to the Government, while the recommendations made in 2004 suggested that the elimination of exemptions on utilities, construction and real estate, and transportation would yield considerable revenues.
The overall plan in 2004 was to recoup $12 billion in revenue based on 2002 levels.
http://www.jamaicaobserver.com/magaz..._IN_BUDGET.asp
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