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Increase gas tax - Economist urges Gov't to top up petrol cess as part of reform

Published:Thursday | January 7, 2016 | 1:00 AMEdmond Campbell

CALLING FOR urgent radical tax reforms, economist John Jackson has suggested that the Government increase tax on gasolene in order to fund the national budget.

Jackson, in making the proposal, said diesel should be exempted from the cess in order to safeguard the public transport sector.

While recommending the increased tax on petrol, Jackson said the Government could provide some easement to motorists by removing the fee on motor vehicle licences.

Jackson reasoned that there are few other areas in which the Government can collect taxes that are as efficient as a tax on gasolene, pointing out that there is minimum leakage in terms of the tax collection on petrol.

Noting that while this move would not necessarily be the most politically correct one, Jackson said it would yield the revenue needed by the Government and help to reduce the country's massive oil import bill, as well as encourage the owners of motor vehicles to be more responsible in their driving habits.

The special consumption tax (SCT) on petroleum has both specific and ad valorem components, which vary by product. The ad valorem rate is 10 per cent, while the SCT was increased by J$7 per litre last March.

The Government has been undertaking several tax-reform measures as part of its agreement with the International Monetary Fund.

Among the reform implemented thus far is the employment tax credit, which can reduce effective corporate income tax rates to 17.5 per cent, from 25 per cent.

Meanwhile, the well-known economist is also recommending a reduction in general consumption tax (GCT) from 17.5 per cent to 10 per cent while at the same time widening the base of the tax.

"This country needs radical tax reform, and it needs it urgently," Jackson contended, while addressing the monthly meeting of the Lions Club of Kingston at the Institute of Chartered Accountants on Ruthven Road, St Andrew, yesterday.

According to Jackson, 50 per cent of the taxes levied on Jamaicans come from the GCT and other consumption taxes. He said another 20 per cent comes from Pay-As-You-Earn taxpayers.

"Seventy per cent of our taxes come from basically three significant categories of taxation," he said.

Jackson took the Government to task for the introduction of the minimum business tax (MBT), saying the move to impose such a tax was unwise.

Companies or other corporate bodies incorporated or registered in Jamaica, including overseas companies conducting business in Jamaica, are required to pay MBT, including those exempted from income tax.

"Why would a minister of finance go and introduce what I call a 'dibi dibi' minimum tax on corporations to make it much more difficult, and you are diverting the attention of the tax collector from the critical areas, and you are moving him into an area that is not going to bring you much revenue - that's madness - that's not innovativeness," he declared.

He said the bulk of the taxes collected from the minimum tax on corporations would be deducted from the companies that are already subjected to paying taxes.

In a no-holds-barred comment, Jackson said rather than making the system more simplified "we need to make it complex so we can find jobs for the boys, or the girls, as the case might be, rather than trying to make the system much more effective, and you collect the taxes".

One of the problems of doing business in Jamaica, Jackson highlighted, is the amount of taxes that has to be paid by taxpayers. "And, we have made it vastly worse, and we have burdened people unnecessarily, and we have created a disincentive for people to be in the formal system and to formally organise their businesses."

edmond.campbell@gleanerjm.com