Right track, but far way to go
As the time approaches for the seventh review of the performance of the Jamaican economy under the extended fund facility offered by the International Monetary Fund (IMF), The Briefing reviews the highlights of the sixth review completed at the end of last year.
The report outlined that although there is slight improvement in business confidence, there is no clear sign that investments in the economy have increased significantly, neither is there any strong evidence of economic growth. Overall economic performance has not improved, and gross domestic product (GDP) projection for the year has fallen from 1.1 per cent to 0.9 per cent. Credit to the private sector has fallen by 4.4 per cent relative to last year. It was, however, highlighted that if lower oil prices are transferred to local production processes and infrastructural project expansion continues, the prospects for growth this year should improve. The IMF mentioned that loss of public support for the programme may increase if there is no real improvement in the number of jobs available and an increase in economic growth is not materialised.
Fiscal performance is threatened by less than projected tax revenue receipts, possible disruptions in external financing, including PetroCaribe, and not materialising a lower public sector wage bill. Risk to the financial sector includes the ad hoc start of the Jamaican Government bond market, and failure to implement the repo reforms.
Notwithstanding the risks, steadfast progress continues in some quantitative targets. The Government easily achieved the NIR target for the September quarter after an external bond issue in July.
The Government met all structural benchmarks for September while others remain on track.
n The general consumption tax (GCT) Act was amended in Parliament; they have broadened the tax base and eliminated the zero rating of government purchases under the GCT.
n Amendments to the revenue collection act were also adopted in Parliament to strengthen the power of the Tax Administration of Jamaica and the Jamaica Customs Agency. The Customs Act was also amended.
n An action plan has been developed for public sector transformation and a public service database, e-Census, has been developed.
n The Financial Sector Commission has established a minimum transaction size for repos and a strategy for the tightening of prudential standards in an effort to reduce the size of the retail business.
n Parliament adopted the insolvency act and a legislation to support the flexi workweek.
n An automated tracking system for the approval process for construction permits has been implemented in all parishes.
Structural benchmarks to be achieved in 2015 are:
1. The Government is contracted to conduct an entity-by-entity review of all grandfather companies and their specific tax incentives in the context of the new tax incentive legislation.
2. By the end of June 2015, the government is to table changes in legislation for the new public sector pension system, expected to be implemented by June 2016.
3. Government is to transfer the functions currently held by the Fiscal Policy Management Unit (FPMU) to a soon-to-be-established a new cash management unit in the Accountant General's Department.
4. Government is also to increase staffing at the large taxpayers offices by employing 30 additional auditors to help produce a 100 per cent increase in the number of audits, ensure that 95 per cent of e-filing and e-payments are accounted for, and write off all GCT and SCT debts that have been subject to risk rate stress test and have subsequently characterised as uncollectible according to the regulations.
5. Government is to implement phase one of the GENTAX integrated tax software package to monitor GCT, special consumption tax, guest accommodation room tax, etc.
6. Government is to table in Parliament proposals for revamping the Customs Act completely.
7. Government in consultation with the IMF is to introduce new productivity indicators to measure the efficiency and effectiveness of the tax system.
Other proposed benchmarks include:
8. Government to table an electricity act in Parliament.
9. Government to finalise the transfer of retail repos to the trust-based framework.
10. Government to fully implement the Banking Services Act.
Overall, Jamaica has been doing well on the books, but real improvements in economic activity continue to elude us. With the right frame of mind, employment, production and productivity should increase this year.