THE EDITOR, Sir:
As Finance Minister Dr Peter Phillips prepares to announce his tax incentives, I would appreciate you publicising the very vexed issue of the loan tax that is currently being paid by employees within the financial industry.
Some years ago, former finance minister Dr Omar Davies introduced a loan tax to be paid by employees in the financial industry who received loans at concessionary interest rates from their employer. The tax is calculated on the differential between 14 per cent and the concessionary rate offered by the institution.
This tax is payable on the total loan amounts over $1.5 million. The thinking was that the concessionary rate is considered income and therefore taxable.
At the introduction of the tax the benchmark 14 per cent interest rate was determined by the Government based on the average Treasury bill rates at that time.
The vexed issues that have continued to be put forward by the unions to the Ministry of Finance are:
1. Since the implementation of the tax there have been significant changes in the marketplace to include the lowering of interest rates. However, the Government refuses to consider lowering the benchmark interest rate to meet market conditions, the basis on which the policy was implemented.
2. The threshold amount of $1.5 million is not equally applied as recently, the Bank of Jamaica's threshold was increased to $7 million, whilst all other financial institutions remain at $1.5 million.
Given the harsh economic times the Government should give consideration to the plight of the employees in the financial sector most of whom are struggling to keep their heads above water.