Is 14% 'prescribed tax' a ripoff?
THE EDITOR, Sir:
It is beyond me in identifying the reason for the Government's abuse of power in what looks to be the ripping off of members of a productive sector of our society for some time now.
The implications of continued ignorance and disrespect of members of our society are clear to see in various sections of governmental organisations.
While I can understand that the Government has imposed a tax on concessionary loans received by employees of financial institutions, I remain unable to understand why the 'prescribed rate' is 14 per cent when the highest rate paid by the BOJ is currently lower than that and has been that way for a few years now.
The following was taken from http://www.jamaicatax.gov.jm/index.php/2012-05-14-21-26-35/income-tax#be...
"28. I am employed in the financial industry and receive a loan at a concessionary rate. Are there any tax implications?
* Yes, there are. Effective October 1, 2002, employees in specified financial institutions (see below) are liable to pay tax on the difference in interest payment between the concessionary rate and a prescribed rate of 14 per cent arising from any loan exceeding $1,500,000. The tax is deductible under the PAYE system.
Specified financial institutions - Section 5 (A) of Income Tax Act.
a. Bank of Jamaica
b. Merchant banks
c. Development banks
d. Insurance companies
e. Building societies licensed under the Building Societies Act
f. Trust companies and
g. Any other institution licensed under the Banking Act or the Financial Institutions Act, as the case may be."
n Could someone in the Government, the party in power, or the Opposition party kindly explain the rationale behind the fixed number of 14 per cent?
n What criteria did the ruling party or the writers of this 'law' use to arrive at the 'prescribed rate'?
n What causes an adjustment of the 14 per cent?
n A concessionary tax is a 'special tax', and it would seem that it should be to the benefit of a specific body.
n Is there a specific body that benefits from this tax, and how is it utilised to their benefit?
You see, the problem is not so much the idea of the tax. The problem has more to do with the thought process behind the tax.
I implore the powers that be to look into this issue before the stench that creeps begins to walk.