Editorial: Details, please, Mr Holness
In his broadcast last week, Andrew Holness, the Jamaica Labour Party (JLP) leader, made a number of interesting and seemingly attractive promises to voters, some of which require better particulars and deeper analysis to test their long-term viability in the context of Jamaica's fiscal circumstances.
Two of Mr Holness' ideas for a JLP government - should that party win the February 25 general election - have this newspaper's unequivocal endorsement. The first is his plan to establish a council of investment ambassadors whose job will be to "seek out investors from all over the world and bring them to Jamaica".
This is similar to the suggestion we made to the previous JLP administration amid the 2008-2009 global financial crash, borrowing from a strategy employed by the then British prime minister, Labour's Gordon Brown. The idea didn't get far.
A fortnight ago, in the face of the absence of bids for the Norman Manley International Airport, we proposed that the privatisation should be via the Jamaica Stock Exchange, reprising this newspaper's old campaign for profitable entities to be divested via initial public offerings. This is one issue on which there is cross-party agreement, given the prior disclosure by the finance minister, Peter Phillips, of the current administration's plan to go this route for some of its divestments.
The public, like this newspaper, however, should want details of the JLP's plan to lift the tax-free threshold on personal income to J$1.5 million, a jump of J$907,200, or 153 per cent. This ought to be enticing to the workers to whom Mr Holness appealed. The opposition leader, however, did not indicate what will be the cost of this give-back, say specifically how it will be financed, or give a timetable for its implementation.
A number of facts are worth noting.
The projected earnings from personal tax this fiscal year, at the current threshold, is J$76.5 billion, a chunk of which would be forgone in the future. Some of what is given up might be recouped with substantial economic growth or job creation, but there is no supporting data here. It is significant in the circumstance that in recent discussion on the abolition of personal income tax, the shadow finance minister, Audley Shaw, was cautious, warning that with Jamaica's "level of indebtedness and expenditure requirement", any such move would have to be on a phased basis. He was less circumspect later on, however, in floating the idea of doubling the minimum wage.
Some of the give-back could probably be recouped from a progressive tax regime that charges higher-income earners more than the 25 per cent flat rate paid by all employees, but the analysis is necessary. In 2012, when the Private Sector Working Group on tax reform addressed this issue, it proposed a 15 per cent marginal rate for persons earning between $499,000 and $1.123 million, and 25 per cent above that level.
But it would offset some of the lost earnings by lowering the rate of the general consumption tax (GCT) and removing the exemption and zero-rating from most products. Another issue that requires more information, including data on the agency's likely cash flow, is Mr Holness' promise for the National Housing Trust to issue 60-year mortgages, or double the time it normally offers.
Delivering on these undertakings and returning a primary balance of 7.0 per cent of GDP may be easy once we have the details.