Employment begins to benefit government coffers
McPherse Thompson, Assistant Editor _ Business
The government said that an increase in employment and improved compliance from employers being able to claim employment tax credit has begun to show improvement in its coffers in relation to pay-as-you-earn (PAYE) and education taxes.
At the same time, it has partly attributed an increase in the stock of public debt to the continued depreciation of the Jamaican dollar and other currencies.
According to the 2014-15 fiscal policy paper tabled in Parliament by Finance and Planning Minister Dr Peter Phillips recently, for the period April to July this year, PAYE "benefited from the increase in employment and improved compliance from employers being able to claim employment tax credit, provided they file and pay on time".
Higher interest payments were largely responsible for an increase in withholding tax on interest, up $1.05 billion, while an 11.6 per cent increase in education tax, up $664.1 million, also benefited from increased employment.
As part of the economic support programme with the International Monetary Fund (IMF), the Government, in reforming the corporate income tax regime, replaced sectoral incentives with credits and allowances based on employment and use of capital.
incentive to hire
In the March 2014 memorandum of economic and financial policies, the Government argued that the employment tax credit may reduce the rate of effective corporate income tax to as low as 17.5 per cent, "which is critical to enhance Jamaica's competitiveness. It also provides important incentives to increase employment, which is very important in light of high unemployment".
Co-chairman of the Economic Programme Oversight Commit-tee, Richard Byles, noted at a media briefing in December last year that PAYE collections "have pretty much" trailed budget almost all of fiscal year 2013/14.
"We all know that there have been layoffs and the layoffs seem to be pretty much in the formal sector ... some of them in the middle and near to the top. But some of the jobs that have been created are more to the bottom, and so maybe that is why the PAYE is lagging in that way," Byles noted then.
According to the Statistical Institute of Jamaica, the unemployment rate in July was estimated at 13.8 per cent.
The fiscal policy paper said Jamaica's total stock of public debt stood at $2.06 trillion at the end of July 2014, a 5.9 per cent increase over the $1.94 trillion registered at March 2014.
In addition to the depreciating local currency, the increase was attributable to capital market debt raising of US$800 million in July 2014, IMF budget support inflows of US$70 million, and financing of the fiscal deficit.
The policy paper noted that during the review period, revenue and grants totalled $121.75 billion, a shortfall of $2.56 billion against the target.
Of the total, tax revenue amounted to $111.61 billion, broadly in line with the target, falling short by just $611.1 million.
Tax receipts increased by $3.12 billion, or 2.9 per cent, over collections for the same period last year, the paper said.
A 13.9 per cent increase in GCT on imports was due mainly to the depreciation in the value of the Jamaican dollar, new measures which entails the Government paying GCT on the purchase of goods and services and increased compliance.