Fri | Aug 18, 2017

New measures necessary to assist poor - PSOJ

Published:Saturday | May 20, 2017 | 5:00 AM
Dennis Chung

The Government must implement additional social welfare measures to help poor Jamaicans who are getting state benefits cope with the effects of the rising prices in the switch to indirect taxation, the Private Sector Organisation of Jamaica (PSOJ) has suggested.

The recommendation comes in light of an assessment by the Planning Institute of Jamaica (PIOJ) of the tax measures imposed to fund the increase in the income tax threshold to $1.5 million from $592, 800 - a controversial promise that helped secure the Jamaica Labour Party's win in the 2016 general election.

The 'Who Benefits? Who Pays?' assessment, presented on Wednesday before a parliamentary committee, said the findings "suggest" that the typical household in each group benefited from the increase. Those in the poorest income groups would not benefit, it said, if the increases in social safety net, such as the Programme of Advancement Through Health and Education (PATH), are not factored.

Those PATH increases are to come on stream in June. The School Feeding Programme has also been increased.

 

Declining purchasing power

 

But what has got the PSOJ talking is the finding that "non-PATH households in the bottom-five deciles (poorest) will be worse off" because of their declining purchasing power caused from rising prices.

"They have to increase welfare spending. It's going to have to happen informally," Dennis Chung, the PSOJ's chief executive officer, said of what the administration will have to do to help that group of Jamaicans, whose total number the PIOJ did not disclose.

... Gov't needs a productive workforce - Chung

According to the chairman of the National Solid Waste and Management Authority Dennis Chung, job creation will have to form part of the Governments's plan to assist poorer Jamaicans who will be negatively affected by the new tax measures, as outlined in the 'Who Benefits? Who Pays?' report from the Planning Institute of Jamaica (PIOJ).

"For example, they're going to say 'let's create jobs'. At the National Solid Waste Management Authority, for example, we have one garbage truck and one driver with three or four side men. That's the sort of thing we're going to have to do," said Chung.

Chung, who is also the chief executive officer of the Private Sector Organisation of Jamaica, said the organisation still supports the switch from direct taxes on things like income to indirect taxation, which focuses on goods and services. But he said the PIOJ study, which needed to be more comprehensive on the tax impacts, shows why the Government needs a productive workforce.

 

Improve spending

 

"I agree with the move to indirect taxation, but what you do is nullify that somewhat by applying more indirect taxation than you had under direct taxation," he argued.

What the Government should do, he insisted, "is move to indirect taxation by not applying as much increase. So, you improve the spending within the economy, get the compliance rate up, improve economic activity and encourage capital."

Approximately $30 billion in taxes have been imposed to fund increasing the income tax threshold to $1.5 million.

The PIOJ said the country's wealthiest will pay the most for the income tax giveback. But it said that same group will benefit the most because more persons in those households (two and more) are formally employed and their income is above the previous income tax threshold of $592,800.

jovan.johnson@gleanerjm.com