The Government of Jamaica has given up on collecting J$230 billion of unpaid taxes and has got the approval of lawmakers to write it off as bad debt.
The sum is equivalent to more than one-third of the Government's annual budget and it is double the J$119b of savings Jamaica expects over seven years from the just-concluded debt exchange.
Minister of Finance and Planning Dr Peter Phillips piloted legislation to write off the principal arrears as well as penalties determined to be uncollectable, which was passed by the House of Representatives on Tuesday, March 12.
The bill will next move to the senate for approval.
The J$230 billion covers 70,245 accounts in arrears up to December 2011. The larger portion of the write-off, J$195 billion, is for taxes outstanding for more than three years.
The legislation, piloted by Phillips, will also allow the finance ministry and its revenue collectors greater discretion to manage outstanding arrears.
Historically, unpaid arrears remain in the "active inventory" of Tax Administration Jamaica, and are reported to the Ministry of Finance.
Phillips said this practice creates a false picture regarding tax management.
"This large amount of taxes due probably contributes to an unrealistic collection expectation and the perception of regular breach of the targets by the TAJ," Phillips told lawmakers.
"What this bill seeks to do is to grant the power, essentially to the TAJ department, in keeping with modern tax administrative practices and modern business practices, to determine when a tax debt is uncollectable and to grant flexibility to the Tax Administra-tion authorities with respect to writing off any of this debt at any point in time," he said.