The Editor, Sir:

On Friday, May 1, an excerpt from a speech made by the minister of finance, Audley Shaw, was carried on TVJ's late-night newscast. In that excerpt, the minister made two statements concerning the reintroduction of GCT on computers that left me confused. "It is designed to collect taxes from the banks and large companies that used hundreds of computers" and second, "students could purchase their computers through schools to avoid paying the GCT."

First, GCT is an incremental tax which is usually absorbed by the end-user. However, in the case of most businesses registered under the GCT Act, it is paid on the procurement of goods and services, then deducted from the amount collected from the sale of good/services by those entities.

Where the GCT amount paid by an entity (input tax) is greater than that collected (output tax) in any period, the net amount can either be claimed as a refund or applied as credit towards future liabilities.

The GCT paid (input tax) is either recovered immediately, through the return for the period in which the purchase occurred or over a protracted period, as in the instances of large capital purchases.

Therefore, in the case of "banks and large businesses" they would be able to recover the GCT paid. The negative impact, for them, would be confined to an increased cash-flow requirement which can usually be resolved through increased suppliers' credit.

In the case of micro/small businesses generating less than $3,000,000 in annual revenue and individuals, the GCT paid on purchases is irrecoverable and must be absorbed as an additional cost.

It, therefore, follows that the ministry of finance would not be taxing the large commercial entities but the micro-business sector and individuals.

Further, the increased cost to the micro-business sector will adversely affect attempts to increase their efficiency and accountability through computerisation.

Second, the suggestion that students purchase their computers through schools would create a nightmare for both students and the schools.

Commercial transaction

The administrations of schools were never designed nor have the capacity to handle the level of commercial transaction that this would generate.

In the unlikely event that a school can manage these transactions, what are the implication for warranties and repairs?

Would schools also sell spares parts and accessories and supplies?

The application of differential taxes or selective exemption to these taxes on any item or service is, at best, difficult to manage.

Given Jamaicans propensity to "beat the system", this public suggestion to acquire computers through the schools is a strong encouragement for tax evasion.

I am, etc.,

CONCERNED CITIZEN

Ocho Rios,

St Ann