Briefing | Revenue measures
Loan receipts in the 2017-2018 Budget are estimated at $159.6 billion dollars; $70 billion more than last year's 89.3 billion.
Where will the tax revenue come from?
1.Budgeted tax revenue for the 2017-2018 financial year is an estimated $488 billion, $62 billion more than the revised estimates for the 2016-2017 FY. The increase in tax revenues is expected to arise from three main sources - income tax general consumption tax (GCT) and special consumption tax (SCT). Revenue receipts from income tax is expected to increase from $50 billion to $69.9 billion, notwithstanding the expected loss of revenue form the increased threshold; it appears more people will be pooled into the income tax net presumably. As people receive more income they are expected to spend more, both domestically and internationally. Revenue receipts from GCT on imports is expected to increase by about $9 billion, while GCT collected locally is expected to increase by about $6.6 billion. Along with GCT, revenue from SCT on imports and SCT on local goods are expected to increase by $3 billion each, an increase of $6 billion in total for the 2017-2018 financial year. Import duties are estimated to increase by $4 billion over last year.
What noticeable changes are budgeted for the 2017/2018 FY?
2.Revenue receipts from travel tax are estimated to increase by approximately $3.5 billion, while receipts from passenger levy are expected to increase by a little over $1 billion. Revenue receipts from stamp duties are expected to increase by $1 billion. Hotel revenues from gaming machines are expected to fall by $26 million in the 2017-2018 financial year. Telephone call tax is expected to fall by half a billion dollars. Guest accommodation room tax is expected to increase by $250 million.
What happened last year?
3.The government announced that it will increase the income tax threshold to $1 million as of the 1st of July 2016 for everyone, further increasing it to 1.5 million by the 1st of April 2017. To help recover the resulting short fall in the Budget, the personal income tax rate for persons earning more than $6 million was increased from 25 to 30 percent. SCT on automotive fuel increased by $7 per litre, Introduction of SCT on liquefied natural gas (LNG) and revision of the heavy fuel oil rates, $1.415 billion, $2 increase in SCT on cigarettes to fetch $0.574 billion and increase in the departure tax from approximately $15 to $35 to fetch $5.3 billion. This increase in gas tax occurred in in the 2015/2016 budget as well, the former government impose a $7 tax on gas, and a $1.5 increase in tax on cigarette on the premise the oil prices are tending downwards.
What is the general reaction this year?
4.The budget and socioeconomic conditions across the island appear to support the move towards the $1.5-million threshold and later a gradual move towards indirect personal taxes.The IMF mission team is here to review Jamaica's performance thus far under the new standby arrangement. Under the preceding extended fund facility, Jamaica had to maintain the primary surplus target of seven per cent of GDP. The hope to achieve five per cent economic growth in three years needs immediate attention, especially where nano, small and medium sized enterprises are concerned. They are the drivers of economic output in recent times and must be supported with resources. China's central bank this week reduced its reserve requirement ratio and mandated commercial banks to use the extra liquidity to provide lending to support agriculture and small businesses. Jamaica's Central Bank does not have the power to use monetary policy to influence this particular channel and commercial Banks profit portfolio might not permit certain investments. This, along with a general misunderstanding of how to increase the fluency of the monetary transmission mechanism across the island, increases the need to find novel ways to mobilise capital outside of the lending sector.
How can Ja mobilise capital?
5.The proposed Nano Stock Market on the mobile money platform is the perfect recipe to provide equity instead of loan financing to help capitalise small firms, while at the same time provide centralised technical support in management, marketing, accounting, entrepreneurship and economics to help them transition into structured legitimate businesses. The support structure provided by the Nano Stock Market will provide needed work experience for university students while at the same time help to teach Jamaicans financial literacy and create a better understanding of investment and equity across the island.