New Taxes vs. Increased Tax Compliance
by David Mullings
The Prime Minister recently announced, during an interview, that new
taxes would have to come on stream. This will happen almost immediately upon the signing of an agreement with the IMF and before the end of the fiscal year in order to close the J$10 billion gap between revenue and expenditure.
All economists agree that raising taxes during a downturn is usually
more harmful than beneficial. I dare say that increasing taxes at this
time also increases the tendency of people to attempt to avoid paying
taxes at all. Jamaica has a GCT and raising that from 16.5% is clearly
on the table. There are already ways to avoid GCT and I believe that
increasing this tax, while it does theoretically widen the tax net
because it is a direct tax, will lead to even more avoidance unless
measures are put in place to ease the tax burden on PAYE individuals.
Here are the unnerving facts:
(1) Most of the personal income taxes is already paid by the 350,000
PAYE individuals who fall within the net (it is estimated that 120,000
employed people fall outside the PAYE net).
(2) The income tax threshold will move to J$440,000 on January 1, 2010
from J$220,000 in early 2009. This results in 132,000 PAYE workers no
longer paying tax and was done because of the new special consumption
tax on fuel and taxes on emoluments introduced this year along with
other new or increased taxes.
(3) Only 4,000 people other than PAYE workers pay income tax in Jamaica.
(4) 1% of registered businesses account for 60% of the PAYE
contributions according to a 2007 Inter-American Development Bank
(IDB) study.
(5) The same IDB study estimated that only 71% of the corporate income
taxes paid in Jamaica were paid by only 1% of companies.
(6) The IDB also estimates that 40% of the economic activity in
Jamaica is untaxed.
(7) The Prime Minister in the past pointed out that of 500 medical
doctors identified at random from domestic directories, a mere handful
was on the tax roll and filed returns.
On June 11, 2009, Senator Arthur Williams, Minister of State in the
Ministry of Finance and Public Service spoke about comprehensive tax
reform being worked on while addressing the graduation exercise of the
Tax Audit and Revenue Administration Post Graduate Diploma Programme.
He said that the “tax regime is burdensome, complex and inequitable”
and that “A more simplified system will encourage local investment and
formal business activity, while also making Jamaica a more attractive
destination for foreign direct investments. Voluntary tax compliance
will improve, because it would be easier to pay one’s taxes,”
If the Prime Minister does in fact prefer to introduce new taxes while
raising others instead of taking this opportunity to introduce this
much talked about “simplified system” then it will be one of the
greatest missed opportunities since 1962.
PAYE workers cannot afford any more taxes and they will definitely
find a way to avoid the new taxes as best as possible. My next post
will deal with the proposed cuts to the public sector and a
counter-proposal.
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6 Responses to “New Taxes vs. Increased Tax Compliance”
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You have so many valid points here. As one of the PAYE workers mentioned in your article I feel very slighted. The increase in the Tax threshold feels to me like “Indian Giving” because as they gave us the reprieve with one hand they took it back with the other by imposing taxes on our emoluments.
The Govt tax situation is a basket full of holes. They are mean and lazy. They are taxing the easy man…the people who are working and get a pay check. Why don’t they get up and go look for all the people out there who earn so much untaxed money? Why don’t they go and find the companies that are taking taxes from their employees but not paying them over to the Govt.? Why? Because it is easy to sit in Gordon House and pass the buck to the people who hold a TRN number. It is not fair. 350,000 PAYE workers…..you have over 3 million people in the country…WOW!!!
Thanks Mr Mullings, look forward to your counter-proposals.
Best wishes.
FOR THE GOVERNMENT OF JAMAICA.. IT SHOULD BE … PLAN PLAN PLAN ..MANAGE MANAGE MANAGE. WATCH WATCH WATCH…LONG TERM VISION… LONG TERM VISION… LONG TERM VISION, WITH OUT THESE 3 COMPONENT IT DOES NOT MATTER WHICH GOVERNMENT COME TO POWER THEY ARE GOING TO MAKE THE SAME MISTAKES…THE PNP WAS SPENDING AND NOT THINKING.. THE JLP COME IN . THEY ARE TAXING AND NOT THINKING… SO THEY ARE ONE IN THE SAME… WE DEFINITELY NEED REAL ACCOUNTABILITY IN GOVERNMENT.. THERE MUST BE A RECEIPT SYSTEM MAKE MANDATORY.. EVERY BODY MUST SUBMIT A RECEIPT IF THEY WANT TO BE REIMBURSE FOR ANY THING INCLUDED THE PRIME MINISTER.
While I do have mixed emotion about the way Buju Banton was implicated, I strongly believe that if he is found guilty he should receive maximum penalty under the U.S. laws. Here is why, besides his anti-homosexual philosophy, he has been known to incite violence indiscriminately against his own fellow Jamaicans to have his way. Being a man of his statue with so much influence and economic resources, why couldn’t he take the high road of promoting productivity and positive vibes to the vulnerable of our society that look up to him, instead of stooping to the gutter, selling death to other human beings? (Audie Morgan)www.jcansunited.org
What are some other ways I can get this done? Thanks for the info…
Jamaica needs to make the dual citizenship folks pay taxes. If you are Jamaican and lving in US, Canada or England you need to pay Jamaica taxes. Thus, these folks want to vote in Jamaica and claim Jamaica as their birth country, but are they paying taxes. I can appreciate they send money to their relatives, and visit for X’mas with an arm full of foreign goods, but the only time Jamaica really collects from them is when they pay customs at the airport for their gifts. Thus, they may rent automobiles and get a ticket from a policeman on the way to visit family, but they do not stay in the hotels. They spend their visit sitting around the family home FOR FREE. They only purchase some food while in Jamaica and may take everyone out to the movies/concert, but a bucket of chicken and some pocket change is the last the family sees of them until next year. Jamaica is not really getting its due from these Jamaican claiming folks. Tax them man and the family members need to charge them rent…..