Sun | Sep 23, 2018

Experts urge caution on tax break

Published:Thursday | March 31, 2016 | 12:00 AMNeville Graham

Experts are urging caution in relation to the impending implementation of the Government's tax plan, noting that while the short-term benefits may be welcome in some quarters, it could result in negative effects across all sectors.

That was the general tone of the contributions during a tax forum put on by the Hugh Lawson Shearer Trade Union Education Institute, based at the University of the West Indies in St Andrew, yesterday.

Dr Terrence Yhip, visiting fellow of the Department of Economics, is warning that while the tax break for those earning less that $1.5 million will cause more money to be available for spending in the short run, the long-term effect might cause more harm than good.

Yhip said there might be hard choices to face if what he calls the experiment fails.

He predicted that the expected multiplier effect might not materialise because of the many things that can go wrong, especially in the way the economy is structured.

Yhip said when the options run out, the going might get rough.

"The ironic thing is that you may have to raise general consumption tax because, after all, you are under an International Monetary Fund programme, and if you are to backslide, your debt rating is going to suffer," Yhip warned.

He was supported by KPMG tax expert Denzil White, who pointed to the transition points between the categories of persons covered by the tax plan.

White outlined the likely scenarios that might play out if the tax break is implemented in its present form.

He suggested that because of the possible complications, a better option would be to give the $1.5 million tax break to all taxpayers and use other measures to recoup the lost revenue.

Helene Davis-Whyte, vice-president of the Jamaica Confederation of Trade Unions, pointed to the possibility of reduced productivity, especially in light of the fact that as many as 60 per cent of public-sector workers earn less than $1 million.

She said if the tax plan was implemented as is, those who would normally participate in productivity schemes would shy away.

"One of the problems that we find with this is that there are many productivity schemes that exist that are in danger if this is implemented because there are many workers who will not want to be more productive because whatever comes to them for being more productive will be taken out," Davis-Whyte said.

All contributors at the tax forum called for more careful consideration of the issues and the examination of alternatives before the tax plan is implemented.