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'Retrograde step' - PSOJ decries tax on earnings over $6m

Published:Friday | May 20, 2016 | 12:00 AMEdmond Campbell
William Mahfood, president of the PSOJ.

The Private Sector Organisation of Jamaica (PSOJ) has described as a "retrograde step" the tax package imposed on approximately 12,000 compliant PAYE workers earning more than $6 million, who will be taxed on their earnings above that threshold at a rate of 30 per cent.

According to the PSOJ, the tax package unfairly places a greater burden on PAYE workers.

The PSOJ notes that the measure takes the country back to a period before the 1980s' tax reform, which was not effective when tried by a previous administration.

"It will also result in tax-avoidance measures, which will prove a distraction to the country's fiscal programme," the PSOJ said, adding that "this burden" should be reconsidered.


Concerns remain


Speaking with The Gleaner yesterday, PSOJ President William Mahfood said the organisation remained concerned despite clarification that the marginal tax rate of 30 per cent would apply to earnings above $6 million.

It had been widely thought that the tax would apply to earnings above $1 million for persons earning more than $6 million.

Ayon Cruickshank, acting director of internal trade in the Ministry of Finance and the Public Service, had offered the clarification after finance minister Audley Shaw's opening presentation in the Budget Debate on May 12.

Speaking with Ian Boyne of the Jamaica Information Service, Cruickshank made it clear that as of July 1, two rates would apply to persons earning above $6 million: earnings between the $1 million threshold and $6 million would be taxed at a rate of 25 per cent, while earnings above would be taxed at 30 per cent.

Yesterday, Mahfood said the Government could lose revenue from the proposed tax intake "because most private business owners will use other methods to minimise their tax liabilities".

He said: "We feel that measures like these are counterproductive. We are in favour of taxes on consumption, whether it be on property taxes or motor vehicles, but it has to be done in a way that it is equitable to all people."

In a release yesterday, the PSOJ said it welcomed the Government's intent to move away from direct to indirect taxation or consumption taxes "as this, we believe, will better address the compliance challenge we face, where only 326,000 of the 1.15 million working persons are on PAYE, while a significant number of registered companies are not tax compliant".

Turning to the $7 tax on fuel and special consumption tax on liquefied natural gas, the PSOJ said while this was an indirect tax, this measure would have an inflationary impact, which would further mitigate against the country's economic reform programme in a climate where energy costs are already high, due in part to the presence of the common external tariff (CET) levied on fuel imports from only some sources, which allows other CET-exempt sources to price unfairly to Jamaica.

The PSOJ called for the Government to remove the CET on fuel imports or withdraw the recently announced SCT in favour of CET placed on fuel from CET-exempt sources.

"The PSOJ again applauds the Government's stated policy position to move away from direct taxation and stands ready to engage in further consultations on measures towards comprehensive tax reform for Jamaica," the PSOJ added.