Sat | Oct 21, 2017

JLP tax plan makes no sense

Published:Wednesday | February 17, 2016 | 12:01 AM

THE EDITOR, Sir:

There are some major issues with the Jamaica Labour Party (JLP) tax plan that the media are not asking, maybe because they have not seen these issues to ask. Below is the biggest issue with this tax plan that I think should be clarified.

Under the JLP tax plan, a person earning $1.5 million will be subjected to a threshold of $1.5 million and will, therefore, pay no tax, but somebody earning $1.501 million will be subjected to the old threshold of almost $600,000, and will, therefore, have to pay tax on $900,000 of their income. At a 25 per cent tax rate, this means that the person who earns $1.501 million will have to pay approximately $250,000 tax. Therefore, the take-home pay of somebody earning $1.5 million will be $1.5 million, but the net salary of the person earning $1.501 million will be $1.251 million. This does not make any sense.

What this would mean is that a person who earns $1.5 million cannot ask for a pay increase to $1.6 million to $1.7 million, as this will mean that they will start to pay tax at the old thres-hold rate and will take home less pay than when they were earning $1.5 million. It means that the senior teacher earning $1.6 million will take home LESS pay than the relatively junior teacher earning $1.4 million.

This is NOT equity. The JLP's tax plan has THREE different thresholds: a $1.5-million threshold (for persons earning $1.5 million or less); an almost $600,000 threshold (for persons earning more than $1.5 million but less than $5 million); and a $0 threshold (for persons earning above $5 million).

This will lead to many problems in workplaces, as managers will start to take home less pay than the person they supervise. These questions have to be asked, because I am sure many Jamaicans do not realise that under the JLP plan, a person earning $1.501 million will take home less pay than a person earning $1.5 million. The JLP is advising the plan as increasing the threshold to $1.5 million, but persons need to understand that this threshold will not apply to everybody.

I hope that The Gleaner will get the JLP to clarify this aspect of their plan.

CONCERNED ECONOMIST