Will property taxes be included in next Budget?
A team from the International Monetary Fund (IMF) was in Jamaica last week providing technical assistance to the Government to complete new rates and bands for property taxes using the 2013 land valuations.
Completion of the new rates and bands is a structural benchmark under Jamaica's standby agreement with the IMF for end-December 2016.
According to the standby agreement, following phase one of the reform, which increased the personal income tax exemption threshold from J$592,800 to J$1 million in July 2016, the Government plans to conclude with a phase-two increase in the exemption threshold from J$1 million to J$1.5 million by April 2017, at a cost of 0.8 per cent of gross domestic product.
It said that in order to offset the revenue loss associated with the phase-two rebalancing effort, and generate additional revenues to expand social transfers to protect the vulnerable, the Jamaican authorities, supported by IMF technical assistance, are narrowing down high-quality revenue options that aim to minimise distortions while balancing equity and efficiency.
It noted that property taxes, which have been shown to be both progressive and efficient, could also be strengthened. As a first step, recalibrated property tax rates and bands using the 2013 valuation will be submitted to Cabinet by end-December 2016.
Asked whether that recalibration meant that the Fund was suggesting that property tax rates be increased and how long after submission to Cabinet would the rates be expected to be applied based on the 2013 valuation, IMF Resident Representative Dr Constant Lonkeng Ngouana, in emailed responses, said that whether property taxation will make it to the tax package to fund phase two of the Government's personal income tax reform is not clear at this stage.
That was because the Government was still exploring the broad menu of tax revenue options, including indirect taxation to be discussed in the context of fiscal year 2017-18 Budget, he said.
Dr Lonkeng further explained that "the purpose of the exercise is to examine what applying the 2013 land valuations implies for the amount of tax liabilities, and recalibrate the tax rates accordingly to ensure the core principles of equity and efficiency with respect to property tax liabilities".
The property tax-related structural benchmark, as discussed with the Government, is on the completion of new rates and bands using the 2013 land valuations, he said, noting that current tax liabilities are based on the 2002 land valuation.
The expectations, set jointly with the Government, was to get the "technical work" done and it was in that regard that the technical assistance team was in Jamaica to assist the Government.