Tax refund, domestic arrears stock decline further
The stock of tax refund arrears was reduced by $4.4 billion during fiscal year 2015/16 and stood at $17.3 billion at the end of that period, according to the Government's interim Fiscal Policy Paper tabled in Parliament two weeks ago.
It continues to be steadily reduced, further declining to $14.8 billion at the end of July 2016, representing a $2.5-billion reduction since the start of fiscal year 2016/17, it said.
According to the Fiscal Policy Paper, tax refund arrears are being closely managed by the Government of Jamaica to ensure that the arrears decline as programmed.
The level of tax refund arrears is monitored under the International Monetary Fund (IMF) extended fund facility arrangement with Jamaica and is a quantitative target that has been met under successive quarterly Fund reviews, the paper said.
Also during fiscal year 2015/16, the stock of domestic arrears was reduced by $524.3 million to $21 billion, and a further reduction by $128.7 million as at the end of July 2016.
The Government said that is also closely managed and monitored under the IMF programme.
According to the IMF's August 2016 memorandum of economic and financial policies, central government accumulation of tax refund and domestic arrears are continuous performance criteria. The accumulation is measured against the stock at the end of March 2016, which was J$21 billion for domestic arrears, and J$17.3 billion for tax arrears.
NO INDICATIVE TARGETS
However, unlike the accu-mulation of the primary balance and tax revenues for which there are specific dollar amounts which must be accrued each quarter under the programme, there are no indicative targets for the reduction in tax refund and domestic arrears.
Former Finance Minister Dr Peter Phillips had given a four-year commitment to reimburse financial institutions and pension funds for withholding taxes.
The finance ministry had not responded to a request for confirmation of the total amount outstanding for all institutions, which was said to include banks, building societies and insurance companies. However, its Fiscal Policy Paper 2014/15 disclosed plans to start paying refunds at a rate of $1 billion monthly.
"The GOJ intends to eliminate the stock of outstanding withholding tax refunds (over 90 days) over the next four years," said the Fiscal Policy Paper tabled in Parliament then.
According to the technical memorandum of understanding accompanying the IMF August 2016 report, quarterly tax refund arrears are defined as obligations on tax refunds in accordance with tax legislation that remain unpaid 90 days after the due date.
This accumulation is measured as the change in the stock of tax refund arrears relative to the stock at end-March 2016, which stood at J$17.3 billion.
Domestic arrears are defined as payments to residents determined by contractual obligations that remain unpaid 90 days after the due date.
Under that definition, the due date refers to the date on which domestic debt payments are due according to the relevant contractual agreement, taking into account any contractual grace periods.
Central government domestic arrears include arrears on domestic central government direct debt, including to suppliers and all recurrent and capital expenditure commitments. This accumulation is measured as the change in the stock of domestic arrears relative to the stock at end-March 2016, which stood at J$21 billion.