No new taxes, please – Mahfood
Against the background of a $8 billion net shortfall in tax revenues reported by the finance ministry, president of the Private Sector Organisation of Jamaica, William Mahfood, is urging Government to stay away from the idea of adding new taxes in the national budget to be tabled in February.
Instead, he said, they should consider lowering taxes and pursue non-compliant companies and individuals more aggressively.
Some of the shortfall related to corporate taxes. At $12 billion of corporate taxes collected between April and November 2014, the revenue from companies was off target by $4.6 billion or 28 per cent.
"A radical approach, I believe, would be to start a process of lowering tax rates, not only corporate taxes, but also duties and GCT," said Mahfood at the most recent PSOJ President's Forum on Tuesday.
He posits that cutting tax rates would be a "bold" move that would eventually translate into more revenues for the Treasury.
"The more these rates are reduced, it would shift the business in the country from the non-compliant individuals and companies to the compliant, therefore, the Government would eventually collect more revenue. It would also act as a significant stimulus to investment and drive economic growth," the PSOJ president said.
Track down tax evaders
But alongside lower tax rates, he said, Government should also be conducting more audits and tracking down tax evaders.
Mahfood, who chairs the family-run big beverage company, Wisynco Group, also suggested that high taxes was a contributory factor to tax avoidance.
"I feel that the tax policy over the years has driven many businesses to non-compliance, any further taxation would make matters worse. We need to try and bring more non-compliant companies and individuals into the tax net," he said.
Minister of Finance Peter Phillips said at last week's capital markets conference, hosted by the Jamaica Stock Exchange in New Kingston, that he was willing to talk about tax breaks as a means of stimulating the market, but said that Jamaica had a "chronic culture" of tax avoidance, which needed to be addressed.
Fiscal year to date, corporate income taxes accounted for five per cent of total tax flows to the Treasury, while PAYE accounted for 20 per cent.
Companies otherwise pay production and consumption taxes, as well as port taxes. The more than $224 billion of taxes collected to November was split $64 billion in personal and corporate income tax, which was close to target because of higher-than-expected inflows from PAYE sources; $76 billion for production and consumption duties, which was off by $5.6 billion; and $82 billion for international trade, which was more than $2 billion below projections.