THE MAN with the tax axe of cartoon fame, Minister of Finance, Dr. Omar Davies, has frankly admitted that the tax system is "really now a maze." And Professor Trevor Munroe, president of the University and Allied Workers' Union (UAWU), has called on Government to review and raise the income tax threshold.
A Tax Policy Review Committee, chaired by Joseph M. Matalon, has been quietly at work for a little while now to straighten out the maze. The last review of the tax system was done 15 years ago when a flat income tax rate of 25 per cent above threshold was introduced, as well as the General Consumption Tax. In a 2002 Staff Monitored Programme report, the IMF recommended that the Government act to simplify the tax system. The private sector has made similar calls.
The work of the appointed committee is expected to influence tax policy for at least the next decade and to produce a fairer tax system. Its work is intended to be 'revenue neutral', that is, not a back door to more taxes. The president of the UAWU has pointed out that when the income tax threshold was first introduced in the 1980s, the allowance was equivalent to US$7,000. Today it is down to US$2,000. As things stand, there is an inequitable burden on the PAYE taxpayer. Only half the potential income tax payers are PAYE, but in the ten-month period of the last financial year up to January they accounted for $22 billion of income taxes while the other potential 50 per cent paid over a mere $899 million.
For companies, the accounting requirements of the present tax system are onerous and expensive. The IMF has recommended the merger of the Education Tax, the NIS, NHT and HEART Trust deductions for ease of administration. The Minister concurs, recognising the big savings in administrative costs to employers. Under the MoU between the Joint Confederation of Trade Unions (JCTU) and the Government for wage restraints, the Government has committed, the UAWU leader says, to reviewing the tax burden on salaried workers.
The Tax Policy Reform Committee, with representatives from business, trade unions, the accounting profession and ordinary citizens, has the benefit of technical advice from an expert team from the Georgia Institute of Technology. We expect policy proposals that will address the critical issues of the tax burden and its equitable distribution and the efficient administration of a simplified system. The sooner the better. And we expect the Government, which must be acutely aware of the deep dissatisfaction with the tax system as it is, to act speedily on agreed recommendations.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
