Susan Smith, Staff Reporter
MATALON
THE GOVERNMENT of Jamaica will be presented with the option of reducing its dependence on income tax and shifting its focus more on
indirect taxes, Mr. Joseph M. Matalon, chairman and chief executive officer for the ICD Group of companies told The Financial Gleaner. This will be one of several options the tax reform committee headed by Mr. Matalon will present to the Government on October 12 and 13 when it makes its
recommendations on alternate tax
structures.
"We will not suggest an increase in GCT," Mr. Matalon said. "The first thing we would like to see done is to cut down the list of the zero rated items. This would have very significant positive effect on Government revenue," he explained, noting that export items and diplomatic missions would be best kept with zero-rated taxes.
BIGGEST CONCERN
"Our biggest concern is the individual income tax PAYE (pay as you earn). This is being disproportionately shared by the tax payer and the 25 per cent threshold has not kept up with inflation," he said. Mr. Matalon said taxpayers should be relieved of some types of PAYE such as education taxes which do not provide individuals with any direct benefits.
"We will need to find a way to substantially increase threshold levels and eliminate or consolidate some of these PAYE taxes," Mr. Matalon said.
INCREASE EMPLOYMENT
Mr. Paul Cobourne, GCT specialists of Price Waterhouse Coopers, thinks that this idea may increase employment and be good for the economy as it will be more of an incentive for people to want to work. The financial analyst said, "There is a psyche that the more I work, the more I am taxed." But Errol Gregory, financial analyst, believes Government may not opt to abolish any of the income taxes as they are easy to implement and produce a highly predictable outcome.
The tax reform committee was appointed in May of 2003 by the Government to make recommendations on
simplifying and restructuring the Jamaican tax system in order to increase its revenue potential.
According to Mr. Matalon, the team of overseas consultants has prepared a series of staff papers on individual taxes, payroll taxes, property taxes, stamp duties, the Consumption General Equilibrium (CGE) model and a tax burden study. He said that the CGE will allow them to estimate the overall economic implications of any package of the tax reform and the ability to enhance the growth projection of the economy. The tax burden study examines what per cent of their income Jamaicans from every income level pay out as tax. Mr. Matalon said, "We don't want our analysis to be regressive."
INHERENTLY REGRESSIVE
Nevertheless, Mr. Gregory opines that indirect taxes such as GCT are inherently regressive because they hurt the lower income group more. Reducing the list of zero rated items may have the same effect as increasing GCT but to a lesser extent. "The big man with $20,000 will pay the same tax as the man with $2,000 on the items," he said. Information from the offices of the Ministry of Finance and Planning reveals that the Government collected a net figure of $130.8 billion from the total tax revenue for the fiscal year 2003 to year 2004.
