Susan Smith, Staff Reporter
The new tax measures offer little to the average worker. This workman is carrying out river training of the Chalky River in Bull Bay. - IAN ALLEN/STAFF PHOTOGRAPHER
THE INCREASE in the income tax threshold will have a negligible effect on the pay package of workers, according to experts polled by the Financial Gleaner.
On April 14, Minister of Finance and Planning, Dr. Omar Davies, in his 2005-2006 budget debate presentation in Parliament, announced that the income tax threshold would be lifted to $169,104 from $120,432, as at July 1. This is an increase of approximately $40,000.
Dr. Davies also announced that another increase would follow in January 1, 2006, lifting the threshold to $193,440 on January 1, 2006. Included in his tax plan was an increase of the General Consumption Tax (GCT) from 15 per cent to 16.5 per cent, effective May 1.
"The effect of the increase in the income tax threshold is negligible," said economist Dennis Chung in reference to the benefits for workers. He believes the increase in GCT, which took effect on May 1, will erode the income tax threshold.
DECLINE IN STANDARD OF LIVING
Mr. Chung said the increase in the income tax threshold is not going to have a big impact on the lower income levels, because most were not paying income tax in the first place. Furthermore, he sees workers standard of living falling in the lapse between May 1 and July 1 when persons are to supposedly get a relief from Pay As You Earn (PAYE).
General manager for Manpower and Maintenance Services Limited, Audrey Hinchcliffe, said she, too, was a little concerned about this period for her workers. "There is some concern here. We would have loved to see the increase in threshold start at the same time as the increase in GCT," she said. "At this point, you are not in a position to absorb the increase in GCT, but it gives you some time to manage your finances," she added.
However, Mrs. Hinchcliffe firmly believes that her workers will benefit from the threshold. "They will see a little bit more in their pay package. We will see some ease for our workers." reported Mrs. Hinchcliffe.
She noted that the last minimum wage increase in January, which pushed some of the workers into the income tax threshold, has, with this new target, been removed.
In the meantime, Mrs. Hinchcliffe has not denied that the increase in GCT will wipe out any gains made on people's salaries. "It is too early to say, it depends on what people spend their money on," she outlined.
DISAPPOINTMENT
Dr. Trevor Munroe, president of the University and Allied Workers Union, expressed some disappointment at how the tax measures were implemented by the Government. "The raising of the income tax threshold is a welcomed honour," said Dr. Munroe.
"It is to be regretted that the threshold is raised over a
number of steps, while GCT is being imposed immediately in one go," he told the Financial Gleaner, responding to whether Government came close to the Matalon committee's recommendations on the new tax measures.
Suggestions for the reform of Jamaica's tax system by a Joseph M. Matalon-led committee had been one of the bases on which this year's tax plan was set. The Matalon committee had suggested raising the individual income tax threshold to $275,184 in one go.
Dr. Munroe said the disadvantage of this is that the Government had found an immediate relief for one pain, but is inflicting additional pain on the Jamaican people.
Mr. Chung said, "The Government is taking out more from the economy than it is putting in. GCT is projected to turn in approximately $5 billion in revenue, while the increase in threshold is expected to cost the Government $1.5 billion."
But, Jacqueline Coke-Lloyd, executive director of Jamaica Employers' Federation, said, "We think it is a very positive move. We are thankful that we have the threshold in 2006 and 2007, so we can plan." She also noted that it will inform other discussions on minimum wage or the memorandum of understanding that the federation may have in the future.
"The PAYE persons are usually at a disadvantage and we would want to see them treated as fairly as possible," Mrs. Coke-Lloyd added.
