KINGSTON, Jamaica, Wednesday March 30, 2016 – Minister of Finance and the Public Service Audley Shaw says government is encountering challenges implementing promised income tax breaks for Jamaicans, but he’s assuring that the Jamaica Labour Party (JLP) administration will fulfil its promise.
In the campaign leading up to the February 25 general elections, the Andrew Holness-led JLP committed to removing income tax for persons earning an annual gross salary of J$1.5 million (US$12,363) or less. It was one of the initiatives highlighted in a 10-point plan for economic growth and prosperity, outlined in the party’s manifesto.
But Shaw said the government will now need to devise solutions to finance the tax break, as one source of funding previously anticipated, is not available.
“We had suggested that part of the pay back of the $1.5 million (US$12,363) tax break would be use of the tax on fuel that was supposed to be a special fund that was set aside. We have found that the oil hedge fund was not set aside, that it is actually already accounted for in the Consolidated Fund,” he explained as he addressed the Private Sector Organization of Jamaica President’s Forum yesterday.
This Fund is the principal government account to which all government revenues must be deposited and from which expenditure, via warrants, is withdrawn. It was intended that J$9.5 billion (US$78 million) would be used from the gas tax to assist with funding the approximately J$11 billion (US$90.6 million) shortfall in revenue anticipated from the tax relief.
“We have another plan,” the Minister noted, adding that further details will be disclosed after the Cabinet retreat over the next three days, or during his Budget presentation.
“This promise is going to be kept . . . It is firm and irrevocable and my commitment is that even if it doesn’t start April 1, because of the budgetary process, it will at least be retroactive to April.”
Shaw said government believes that Pay As You Earn (PAYE) employees, to whom the proposal applies, deserve the tax break after enduring a five-year wage freeze, as well as a 40 per cent devaluation of the Jamaican dollar, which has significantly affected their purchasing power.
He said there would be further discussion on the matter in Cabinet.
“We will complete that process this week to mitigate the fiscal impact of this measure, and we remain confident that it can be accommodated within the context of broader tax reform, which is where we welcome the assistance of the private sector,” the minister said.
To further mitigate the expected shortfall in revenue, Shaw said the plan will be implemented in “different phases.”
In the meantime, the Finance Minister said the Government also intends to stick to its promise of addressing, in the tax plan, the income band between J$1.5 million (US$12,363) and J$1.8 million (US$14,829) “to have more smoothness and equity.”