Sat | Nov 18, 2017

Imani Duncan-Price | Tax package slap in the face of poor

Published:Tuesday | May 17, 2016 | 12:00 AM
Imani Duncan-Price

It seems like the Government missed the point or was too narrowly focused on checking the box of an election promise, without thinking about the real impact on the vulnerable and near-poor - 1.1 million Jamaicans out there fending for themselves.

I could not believe the weight of a $13.8-billion tax package was levied on the entire country with NO REAL INCREASE in PATH or other social-support programmes as a buffer. This was an unequivocally uncaring move of the Government for the majority of Jamaicans.

Now, don't get me wrong, I've long felt that the majority of PAYE workers have carried too much of the weight of the country's expenses (as their tax IS collectible). So, I'm glad that there is relief for 251,000 Jamaicans, especially our teachers, police, nurses, and other such persons who give so much and earn relatively little.

But tax reform is a delicate balancing act - and this is not balanced. Yes, it is a credible budget by an economist's standards - meaning that the money to fund the tax relief, e.g., the gas tax can easily be collected and, thus, can be counted on. But a credible budget is not always a good budget for people.

 

TRANSPORTATION COSTS

 

As I stated in my last article, transportation costs represent a large share of the budget in the lower-income group, who primarily use public transport - JUTC and taxis in Kingston; route taxis and buses in rural areas. So, my biggest issue with the proposal is the $7-per-litre hike in the gas tax, with no increase in social support for those on PATH and the 1.1m Jamaicans who struggle every day!

• This is harsh and uncaring to the hundreds of thousands of persons who are NOT ON PAYE - every helper, every driver, gardener, every informal worker, every pensioner and their children.

• This is harsh and uncaring to every PAYE worker who earns less than $11,500 per week (the PAYE tax threshold before, so they get no benefit, only increased transport costs) - every store clerk, ancillary staffer, security guard.

• Harsh and uncaring to every person living in rural Jamaica where transportation costs are already higher than in Kingston. Look what happens to our children who don't go to school because parents can't afford taxi/bus fares.

 

WHEEL AND COME AGAIN

 

I fully understand the importance of keeping promises, as people believe politicians are all talk, but don't keep our word. In this case, the present Government, while campaigning, said the $1.5m tax relief, on April 1, 2016, would be done with no increase in taxes. This is clearly a broken promise.

But what's worse is that in trying to keep some semblance to the promise, it is proceeding with a plan that substantially impacts many Jamaicans negatively. So, I suggest, the Government should wheel and come again.

Two options:

1 Raise the tax threshold by $200,000 (more gradually) and reduce the percentage tax rate for those below $1.5m. The 251,000 get some relief, but it will cost the Government and country much less. That way, the Government doesn't have to indirectly tax the already overburdened 1.1m Jamaicans by $13.8b.

2 The property roll was being updated across the country. Use that and increase property tax by 300 per cent for unimproved land and calculate an appropriate increase for improved land. In a country where the majority of the 1.1m poor and near-poor don't have land titles or size properties that attract significant tax, this is a more tenable source of revenue.

If you're worried about collections, hire 1,000 recent tertiary graduates to comb the island and the registry of titles to match the data and then deploy persons to collect from the large landowners, and then redeploy to the next size land parcels, etc.

What taxes will the Government levy in 2017 to fund the $20b hole?

Now there is also a significant hole in the Government's budget. The current $13.8b tax package only funds nine months of the tax relief. Where does it plan to get the additional $4 billion from for the other three months?

If the threshold is raised to $1.5m in April 2017, where will the additional $16b of taxes come from? That is $20b of taxes to come out of the economy next year, and no one is asking any questions on that. Is that a growth Budget?

So, as we analyse the Budget and laud the Government for keeping its promise, I'd like Jamaica to ask, at what cost? Is it fair? And what else is coming?

- Imani Duncan-Price is a World Economic Forum young global leader and development consultant. Email feedback to columns@gleanerjm.com and fullticipation@gmail.com.