Business

WESTERN BUREAU:

Taking its call to the business community in western Jamaica, the Private Sector Organisation of Jamaica (PSOJ) is again urging reform of what it has claimed is Jamaica's complex and unfair tax system.

PSOJ president Joseph M. Matalon and the organisation's vice-president, Nicholas Scott, while addressing business leaders at the second in a series of 'President's Forums', sponsored by Flow Jamaica, described the current system as "hard on Jamaican taxpayers".

Matalon said that a World Bank report reveals that the average, business spends the equivalent of 17 days paying its taxes and has to make 72 separate payments.

"An expensive venture that is double the international average to remain compliant," he said, arguing that the inefficiency, complexity and inequity of the local system were stifling the growth of the private sector and job creation.

Citing an example of the average rate of import duties, which is 10 per cent on the books, Matalon said the collected rate was only five per cent, because unscrupulous persons took advantage of exemptions and loopholes.

In 2004, Matalon led a task force that crafted comprehensive reforms of Jamaica's tax system, but the Government has cherry-picked elements of the reform plan to implement.

"We are losing revenue, favouring selected imports and leaving ourselves open to corruption," he said, arguing that the current tax regime had evolved on a piecemeal basis and in some instances, in response to short-term needs or sector interests.

"It lacks the level of cohesion, consistency and balance offered by a competitive tax framework."

Aiming to achieve macroeconomic stability, the PSOJ said it was recommending a comprehensive reform of the system, which would include the implementation of a competitive general tax regime in tandem with phasing out tax preferences, and a reform of corporate income tax to 25 per cent over the short term, "which will, over the medium term, increase compliance and achievement of agreed revenue targets".

Those recommendations were also incorporated in Matalon's 2004 report.

Regulatory processes

Matalon is convinced that the myriad of regulatory processes will continue to impair business operations, causing prospective investors to shy away from Jamaica.

PSOJ vice-president, Nicholas Scott, in his presentation, said that although macroeconomic stability was necessary, it was an insufficient component for achieving high rates of economic growth and employment.

"The fiscal deficit and the debt represent the largest medium-term risk to Jamaica's macroeconomic stability," he said.

The debt is now at $1.3 trillion, while last year, the deficit was just below 10 per cent of gross domestic product.

The size of the fiscal deficit constrains growth and employment by high rates of taxation, low capital investment and the crowding out of private investment, said Scott.

Absent a change in Jamaica's fiscal and debt profile, he added, other policies alone were unlikely to improve Jamaica's growth trajectory.

His suggestion for obtaining macroeconomic stability is through meaningful reductions in the two areas of expenditure - debt servicing and public-sector wages, and by reforming the budgetary process itself.

Government must reform the budget process by consolidating it, including statutory bodies, the PSOJ vice-president said.

Jamaica should, he said, "coordinate budgeting across the public sector", and move towards constructing multi-year budgets.

Most important, "Consult with the private sector and other stakeholders through various phases of the budget process," Scott said.

janet.silvera@gleanerjm.com