Sat | Jan 20, 2018

Letter of the Day | Shaw 'tax break' uses poor to subsidise rich

Published:Monday | May 16, 2016 | 12:00 AM


So all those, including most pensioners, with incomes less than $592,800 per year will be paying for the tax break given to those with greater incomes than themselves!

The poor will once again bear the burden - it is nothing less than callous - and all to try to save the skin of the new but already failed administration. Audley Shaw and Andrew Holness should be ashamed of themselves, but why should they care if it keeps their gang in (precarious) control of Gordon House?

Other than introducing a much more progressive income tax - with 35 per cent above $3m, 45 per cent above $5m and 55 per cent above $10m, higher taxes on unearned income and on the banks - there was no way out for Shaw, except by cutting the primary surplus to five per cent, or preferably less (for the sake of inclusive growth in the economy). Even with the higher rates suggested above, the increased threshold of $1,000,272 would mean that only those earning more than $4m would be paying more income tax.

But the right-wingers still carry the day with their insistence that indirect (consumption) taxes are better in terms of incentives (to invest) and efficiency (collectability). We know now, after 36 years of neo-liberalism, that the incentives argument does not work. Allowing the rich to retain more of their income leads only to more speculation and global meltdowns rather than greater productive investment.




We also know that indirect taxes are regressive, hitting hardest those who have to spend all or most of their income just to get by, those who never reach income levels to qualify them for tax relief. In this case, the 7.7 per cent increase in petrol tax will hit the poor proportionately more than others, since not only will transport costs increase but also every other price because of additional deliver costs.

As for collectability, this is more a matter of political will than anything else. Why would the ruling class want to penalise itself by introducing effective sanctions for non-payment? Since we seem happy to adopt anything foreign, why not bring down the Internal Revenue Service to replace Tax Administration Jamaica?


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