Tue | Sep 19, 2017

Sensible Budget - IDB boss ... says Gov't's policy will help to formalise the economy

Published:Thursday | March 30, 2017 | 3:00 AMRomario Scott

The recently passed Budget for the upcoming fiscal year continues to generate much rumbling and debate, with the Inter-American Development Bank Country Representative for Jamaica, Therese Turner-Jones, joining a throng of watchful analysts weighing in on some of the critical areas of policy the Government has outlined.

Turner-Jones, who spoke with The Gleaner recently, said that the $700 billion Budget presented by the Government is fiscally responsible and appropriate, given the financial and economic realities of the country.

"It's a smart budget. I think the policy framework is the right one. The budget is aimed at trying to improve equity in the society. It is sensible - not a free for all over a giveaway - and it is appropriately balanced," she said.

Turner-Jones, who is an economist, noted that Jamaica was still being made to maintain the seven per cent primary surplus demanded by an agreement between it and the International Monetary Fund. And the decision of the Government to implement its $1.5 million Pay As You Earn tax threshold 2016 election promise made it inevitable for taxpayers to avoid paying more.

... Now everyone will pay taxes

On the hot-button issue of the decision of the Holness administration to shift to indirect taxation as a policy and further increase the PAYE income tax threshold to $1.5 million, Therese Turner-Jones believes that the policy is a "smart move" and a first step in regularising the economy.

The IDB boss, while making the observation that the Jamaican economy is laced with pockets of informalities, argued that the move to indirect taxes would broaden the base for a more efficient and fairer tax system.

"[The move to indirect taxes] is one way to get rid of some of these informalities in the economy. The people who get hit with the payroll taxes are just one part of the whole taxpayer base, and the whole idea is to broaden that base to get more people to pay taxes," Turner-Jones contended.

"With the shift to indirect taxes, everybody will share in the burden and not just those who are working in the formal economy who happen to have to pay income tax," she added.

With the poor and vulnerable groups set to take a hit, especially from increased costs on certain petroleum products, including gas, Turner-Jones said that the Government had no choice but to strengthen the social safety net, which would cushion the recoil of some of the hard-hitting measures.

The Government announced that it would increase benefits under the Programme of Advancement Through Health and Education by 30 per cent, or $7 billion, for the fiscal year.