Tax plan doubles pressure on fiscal targets — Byles
Meeting the tax-relief election promise will put the fiscal targets of the economic programme under pressure, says co-chair of the Economic Programme Oversight Committee (EPOC) Richard Byles.
Jamaica will enter its final year under the International Monetary Fund (IMF) programme starting this month. The election promise by the Holness administration to waive tax on income below $1.5 million, however, is expected to add pressure to the fiscal targets.
On Tuesday, at his monthly press briefing Byles urged the new Government to finish the economic programme without failing the IMF tests.
"The major challenge is the fiscal targets. In normal times, it is a tough target to hit. We now have abnormal times with a commitment to tax relief, so it is going to be doubly difficult," stated Byles adding that pension reform and civil service restructuring will in itself raise challenges.
Jamaica is required to maintain a primary surplus target of seven per cent under the IMF programme.
Byles said that hitting the primary surplus target allows for the paying down of debt.
"We do need to achieve these numbers," he said. "Once we get that debt down, we will have the scope and the possibility for us to do and spend in the manner we want - albeit responsibly. So from EPOC's point of view, hitting those fiscal targets are absolutely important."
On the positive side, the depreciation of the Jamaican dollar and lower oil prices saved some US$911 million for the 2015 calendar year.
"[This is] giving Jamaica better than expected conditions to complete the necessary economic reform programme. We should seize the opportunity to vigorously pursue completion of the programme," Byles said.
Jamaica produced a primary surplus of $80.1 billion for the 11 months ended February 2016, just above the budgeted target of $79.3 billion when adjusted for the reduction of 0.25 per cent in the primary surplus target. At the end of March the net international reserves stood at US$2.4 billion, comfortably in excess of the IMF target of US$1.5 billion for end-March.
"Jamaica appears to be in a good position to meet the primary balance target of $120.7 billion on the presumption that tax collections in March will perform strongly," Byles said.
"Unfortunately, shortfalls in grants and the bauxite levy has again left us exposed to underperformance".
Revenues and grants form April 2015 to February 2016 were $1.5 billion or 0.4 per cent behind budget, despite continued good performance from tax revenues which are $1.5 billion or 0.4 per cent above budget.