Some public sector workers not anxious to get three per cent increase
A negotiated salary increase to any category of worker is generally a welcome benefit to the individual, but The Gleaner has been informed that some public-sector workers earning a little less than $1.5 million are not in a hurry to get the negotiated three per cent increase in Year Two of the public-sector wage agreement, due in April.
In light of the Government's new tax policy, the three per cent increase is likely to become a disincentive to some workers.
President of the Jamaica Civil Service Association (JCSA), O'Neil Grant, said some members have indicated that the three per cent increase would push them above the $1.5-million threshold proposed by the current administration which would effectively deny them the tax relief for persons earning $1.5 million or below. The Andrew Holness administration had pledged that persons with an annual income of $1.5 million or less would no longer be required to pay income tax, meaning those at the higher end could take home an additional $18,000 per month.
According to Grant, a member of the JCSA sent him a text message recently to indicate that when she gets the three per cent increase come April 1, it would result in an additional $36,000 per annum, pushing her salary above the $1.5-million threshold. He said that the public-sector worker claimed she would not have the benefit of a more than $200,000 tax break per annum under the Government's latest tax plan.
He said this public-sector worker would lose the opportunity to benefit from the tax-free incentive being offered to workers earning $1.5 million and below.
"These persons are saying that it is unfair for them because they are actually going to be taking a pay cut in relation to their comparators who are not going to go above the $1.5 million but are still in the same category."
According to the JCSA president, some members are arguing that there could have been a more equitable solution for the Government to reduce the $1.5-million tax plan to about $1 million and spread the threshold across all income categories.
However, Grant divulged that members of the JCSA earning less than $1.5 million are "quite happy" with the proposed tax-free benefit and are looking forward to its implementation.
Finance and the Public Service Minister Audley Shaw had assured public-sector workers that the plan to increase the income tax threshold to $1.5 million in the upcoming new financial year is only a start.
While addressing staff at his ministry recently, Shaw said that the Government was also committed to providing tax relief for persons earning more.
Former president of the Private Sector Organisation of Jamaica, Joseph M. Matalon, had argued that the Government's proposal was "inequitable and distortionary and would disincentivise persons earning marginally below $1.5 million from seeking additional income (whether through overtime, increased salary, bonus or promotion), as they would become worse off until their income rose sufficiently to offset the additional tax."
He maintained that the proposal, as structured would create challenges for employers in rewarding and motivating staff and would adversely impact productivity.