Business
Jamaica: Proposed tax reforms to increase revenue, stimulate growth
The main revenue generator under the working group’s 145 proposals submitted to Parliament a fortnight ago would be the general consumption tax (GCT).
Although the working group called for a five percentage point cut in GCT from 17.5 percent to 12.5 percent, that would be more than offset by extending the tax to most goods that are now exempt.
The wealthiest 20 percent of Jamaicans currently get 28 percent of the $JMD22 billion (US$ 254 million) in savings due to exemptions, while the poorest 20 percent capture only 11 percent of the benefits.
The working group proposed that the government take $JMD2 billion (US$23 million) out of the new GCT revenues to compensate the poorest directly.
The proposals also call for a US$23 million break for ordinary pay-as-you-earn (PAYE) taxpayers.
Those earning less than JMD$500,000 (US$5,800) will pay no tax at all. Those over the threshold will pay 15 percent on the total amount, or 25 percent of earnings over US$5, 800. Earnings above US$ 12,700 a year will be taxed at 25 percent.
National Insurance Scheme rates would fall to 1.5 percent each for employees and employers, offset by dropping the US$ 11,570 cap on contributions by high earners.
Property taxes would be raised from 0.75 percent of unimproved value to 2 percent, recovering much of the money now lost on administering the levy.
The working group considered charging tax on the improved value, thus hitting wealthy owners of big houses harder than those in the inner cities, but decided it would be too difficult to maintain the necessary records of valuations.
The working group will be meeting with the Parliamentary committee on tax reform next month and hopes that many of its recommendations will be implemented in the April budget.
