Dangerous GCT proposal

A green paper on taxation is now before the House of Representative for consideration. Finance Minister Audley Shaw, like his predecessor Dr Omar Davies, has long signalled his intention to reform the country's tax system.

Shaw has bemoaned the fact that 80 per cent of tax paid in the country is paid by three per cent of Jamaicans. He says the time must come where every person pay his fair share of taxes - no more, no less.

We are at one with Shaw in that regard. Indeed, it is scandalous and criminal for people to seek to evade paying taxes.

Shaw, in his 2009-2010 Budget Debate, listed professionals such as lawyers and doctors who refuse to pay their fair share of taxes. We beg to add media practitioners, consultants and sportsmen to that list.

The Gavel also wants to remind the minister of his ambitious plan to implement a flat tax that would capture barbers and hairdressers, taxi operators and farmers, artisans and plumbers (and the list goes on) who now get by without paying their fair share. We believe Shaw, in failing to raise the matter in the Budget Debate this year, is finally convinced that tax administration would have a nightmare implementing his idea.

And so, by way of the green paper, the minister has raised yet again, this time in a most forceful manner, the idea of regressive taxation. We make specific reference to the proposal that the number of items now exempt from GCT or attracts zero GCT, be taken off that list. We urge great caution in this regard.

The green paper is proposing that GCT be reduced from 17¹/² per cent to either 15 per cent or 12¹/² per cent. At the same time, the number of goods and services to attract GCT would increase. We believe that policy, though it appears mathematically sensible, would have a deleterious effect on low-income Jamaicans.

a higher burden

Regressive tax types such as GCT may appear equitable since it means everyone who consumes a good or service pays equal taxes for it. Morally, though, if not properly applied, GCT could be a killer. And though the rate may be reduced, it places a higher burden on the poor since a greater portion of his disposable income would go towards taxation.

Let us consider the example of an old woman from Epping Farm, St Thomas. Her grandson, who is living below the poverty line, gives her $500 out of his weekly income to buy food. That money is barely enough to buy her oats, a tin of milk and a half loaf of bread.

Should these items be subject to GCT, this old woman, who is barely surviving of $500, will be forced to stop purchasing one of the items. With GCT now applied to these items, suddenly $500 is reduced to $437.50 with $62.50 going to the tax man.

Similarly, the minimum-wage earner may be forced to pay at least $560 in new taxes assuming all his income is spent on items which would attract GCT after January 1, next year.

wary of proposal

Critics may argue that The Gavel is wrongly assuming where taxes would now be levelled. However, we consider the December 2009 Christmas tax package as one of the strongest signal of where Government would head in applying taxes to items and service which had not previously attracted GCT.

Salt, sugar, flour, rice, oats, noodles, tin mackerel, syrup, patty, biscuits, bread, children's crayon books, the cane for the blind, sanitary napkins and tampons, and dozens of other items and services were subjected to GCT. Shaw only rolled back after mass public outcry.

Given this recent past, we are most uncomfortable with this GCT proposal as contained in the green paper.

The fact that Parliament's taxation committee has been dormant is not good news for the weaker Jamaicans. Elected representatives have abrogated their responsibility to the Jamaican people by sitting for the most part quietly and leaving the issue of tax policy to business interests.