Reckless! - MP lashes gov't for shortfall in taxes to finance tax break
Revenue from two of the taxes imposed to fund the personal income tax break are underperforming and the government will have to call on public bodies to fund a shortfall of $1.6 billion, Financial Secretary, Everton McFarlane has revealed.
McFarlane led a team from the Finance Ministry that appeared before Parliament's Public Administration and Appropriations Committee (PAAC) that yesterday examined the revised budget tabled Tuesday in the House of Representatives.
The government had imposed $14 billion in taxes to fund phase one of the revised election promise of raising the amount of income that is taxed from $592,800 to just over $1 million. The measures included increases in special consumption tax (SCT) on fuels, an increase in the departure tax, increase in the SCT on cigarettes and implementation of a new liquefied natural gas taxation regime.
“The SCT shortfall is more related to how oil prices have actually moved on average during the year versus how what we would have been expecting at the beginning of the (fiscal) year," McFarlane said.
"As the price moves, you may find that the ad valorem component may come in less than expected or more than expected,” he added.
McFarlane also noted that there has been a shortfall in the inflows from corporate tax and that there were certain indications from Tax Administration Jamaica. “There are some signs that they (companies) are also filing interim results higher than what would typically have been expected during the course of the year. There is a sense of conservatism about how the last quarter will perform.”
Combined, the shortfall, the Financial Secretary said, is about 0.4 per cent or $1.6 billion off target.
Fitz Jackson, opposition PAAC member, said the disclosure showed the Holness administration's "reckless" implementation of the promise. "It confirms what the opposition has maintained, that the government has been very reckless in its financial planning and creates more uncertainty going forward,” he told The Gleaner as he left the chambers.
However, his claims are being rejected by Fayval Williams, PAAC member and State Minister in the Finance Ministry. “For actual revenues to come in at 0.4 per cent (short), to me and to anybody in the real world, you’re on target.”
Phase two of the income tax break set for April will see an increase of the non-taxable threshold to $1.5 million. The government will require an additional $16 billion to fund that phase. That is in addition to the $14 billion to maintain the first phase.
The interim fiscal policy paper tabled in the Parliament last September had projected tax revenue for the financial year set to end March 31 at $447 billion. That has now been revised down to $445 billion.
The Financial Secretary said central government would make up the shortfall by distributions amounting to $5.2 billion from public bodies.
Meanwhile, McFarlane told the PAAC that total grants and revenue (tax revenue, non-tax revenue, bauxite levy, capital revenue and grants) should end the fiscal year at about $491.3 billion, about $5.2 billion dollars above target. "We are in a fiscal profile that is sound," he said.