New Taxes – This time alcohol…What’s Next?

Despite the promise of no new taxes by the minister of finance Audley Shaw, there comes the announcement of a change in the tax structure for alcoholic drinks which is designed to bring in additional revenue for the government.  One can’t help but remember the famous words of American president George Bush who said

“read my lips – no new taxes”.

The hotel industry is the first to complain and says that their industry can’t accommodate another tax at this time.  Although I normally have little sympathy for them, this time I have to question the imposition of the new tax regime.  In principle if one is going to tax alcoholic drinks then all alcoholic drinks should be taxed.  In this regard closing an existing loophole is good but one has to question whether or not the new structure should have been tax neutral.  That is to say that the new tax structure would not increase the amount of revenue that government would collect but would simply redistribute it amongst companies in a new ratio.  The government obviously feels that the consumers will spend the extra money on the products and anticipates that there will be little reduction in consumption of these alcoholic products.

The problem for me in how government deals with tax issues is that there seems to be a preference for going after the easier victims first.  Thus persons under the P.A.Y.E. system, companies that produce alcoholic drinks and cigarette companies are easy targets.  It is relatively simple for the government to impose taxes on these groups and most new taxes affect them.  The problem with this approach is that it ignores those who are evading taxes.  If the government were to deal effectively with tax delinquents they could probably collect two times the amount that they now receive.   However this requires extensive work and resources in order to bring these persons into the tax system.  The government seems to think that it is not worth the effort to go after these persons and instead focuses on the captive tax payers.

The only way to reduce the tax rates for everybody is to increase the tax base to include all eligible persons.  Additionally if rates were lower then it would encourage more persons to be tax compliant.  However no government has shown that it has the courage to tackle the situation preferring instead to take the easy way out.  When Jamaicans go abroad they have no choice but to comply with the tax requirements knowing that not to do so could result in a prison term.  The recent case of Wesley Snipes sentenced to three years for tax evasion proves my point.  If the government took the same no nonsense approach to taxes then persons will be forced to comply.  In this case the government’s future is in its own hands.