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Tufton wants higher GCT, lower income tax

Published:Saturday | July 4, 2015 | 7:00 AM
Dr Christopher Tufton

OPPOSITION SENATOR Dr Christopher Tufton has suggested that the Government moves away from imposing direct tax such as income tax and go instead in the direction of collecting its revenues from indirect taxes such as General Consumption Tax (GCT).

Contributing to a debate in the Senate on Friday on a bill to increase the personal income tax threshold, Tufton said that there has been a shift in the structure of taxation.

"The trend is towards moving away from income tax, allowing people greater money in their pockets and allowing them to chose how they want to consume," Tufton said.

The bill, which was already passed in the House of Representatives and received the nod in the Senate Friday, will formalise the movement in the threshold or tax-free income to $557,232 per annum, up from $507,312 per annum. This will mean that persons will not pay the 25 per cent income tax that is applicable on the first $46,436 earned monthly. With this increase in the threshold, the tax paid per annum by each individual will reduce by $12,480.

The threshold is to be increased to $592,800 on January 1, 2016.

 

More consumption taxes

 

Tufton, while contributing to the debate on the bill, pushed for more consumption taxes at the expense of income tax, saying the evidence shows it is easier to collect and that it would encourage greater levels of productivity.

"If we are serious about the long-term interest of the country, let us agitate for tax reforms that shift the burden from income tax and other such forms of taxation to more consumption taxes, and if we do that, that is where we are going to realise true benefits," Tufton said.

The call for consumption taxes in favour of income taxes is not a new one. For example, the Matalon Report (2005) recommended that the Government increase GCT and reduce personal income tax as part of its tax reform efforts. In addition, the Caribbean Policy Research Institute, of which Tufton is co-executive director, said that decreasing reliance on direct taxes and shifting towards value-added taxes would result in a stable source of revenue for the Government since indirect taxes are charged on consumption.

Government Minister Mark Golding, in responding to Tufton's call for more consumption taxes and less income tax, said "higher consumption taxes hit the poor more. Income taxes tend to be less onerous on poor people".

He said, however, that consumption taxes can be easier to collect and that low income tax attracts investors.

"The Government is committed to lowering income tax. In fact, we have, under the tax reform programme, lowered income tax for corporations from 33 per cent to 25 per cent," he said.

The Government is targeting the collection of $384.3 billion in tax revenues this year, $64 billion of which is targeted from pay-as-you-earn employees, which includes income tax. GCT, the leading consumption tax, is to provide $70.9 billion.