No automatic tax measure - Shaw
Finance and Public Service Minister Audley Shaw said the Government's $16 billion funding of the second phase of the personal income tax threshold's move to $1.5 million at the start of fiscal year 2017-18 will not be done through an automatic tax measure.
"The issue here is not an automatic tax measure, although, as I indicated ... if it has to come, it will come," he said.
The minister said: "It's going to be done, however, within the context of continuing tax reform."
The issue, he said, "is that we have made a deliberate and conscious decision that we are moving away from direct taxation towards more indirect taxation measures as a way to capture more of the taxpaying responsibilities in the society".
Addressing a press conference on the 13th review of the International Monetary Fund (IMF) extended fund facility at Jamaica House yesterday, Shaw said "at the same time, it's a suite of different things because I'm placing considerable focus, as well, on tax compliance".
Noting that he has spoken publicly in recent days about revenue leakage at Jamaica Customs, the finance minister said, "That's on my radar."
Referring to the tabling of the Budget for fiscal year 2017-18, Shaw said: "We have indicated that whatever is the final roll-out for April, there will be a process going forward that involves all of these things, including ensuring that the cushion, in terms of the social safety net, is adequate and responsive to our needs."
IMF Mission Chief to Jamaica Dr Uma Ramakrishnan, who also addressed the press conference, said the agreed principle between the Fund and the Government on which the decision was made to increase the income tax threshold to $1.5 million was that revenue neutrality would be achieved.
"Discussions are ongoing on how this revenue neutrality can be achieved and what measures can be put in place to achieve this goal," she said.
Revenue neutrality refers to a taxing procedure that allows the Government to still receive the same amount of money despite changes in tax laws. The Government may lower taxes for one particular group of people, but raise taxes for another group, thereby allowing the revenue that it receives to remain unchanged.
The first phase of the increase in the personal income tax threshold from $592,000 to just over $1 million, effective July 1, this year, was funded through a $13 billion tax package imposed when Shaw tabled the Budget in Parliament earlier this year.
Asked if the IMF was concerned about how the second phase would be funded, Ramakrishnan said: "We have been part of the process all along and we continue to be part of the process. We are in the process of discussing and have also provided technical assistance and are exploring the various options that are available for Jamaica to be able to fill this gap, and it is now up to the Government to look at these options."
Shaw said the Government remained strident in its goal to promote equity, efficiency and uniformity in the tax system and, with full support from the IMF, will continue efforts aimed at rebalancing from direct taxation towards more broad-based and growth-inducing indirect tax measures.
He said that phase two of the announced increase in the personal income tax threshold is scheduled to be fully implemented, as promised, in fiscal year 2017-18, starting April of next year. "This will be complemented by comprehensive tax reform which gives due consideration to protecting the most socially vulnerable members of the society," he added.