EPOC hopeful but …Tax revenues raise concern
McPherse Thompson, Assistant Business Editor
The Economic Programme Oversight Committee (EPOC) monitoring Jamaica's four-year programme with the International Monetary Fund (IMF) says it is cautiously optimistic that the Government will meet its targets for the fourth quarter, but is concerned about the underperformance of tax revenues.
At the same time, it lauded the Government for meeting the two most important quantitative targets for the third quarter ended December 2013.
For the nine-month period ended December 2013, the primary balance was recorded at J$61.7 billion, marginally ahead of the target of J$61.6 billion, while the net international reserves stood at US$1.05 billion, considerably ahead of the target of US$836.7 million.
However, EPOC, in its ninth communiqué published yesterday, said the collection of taxes continued to lag behind the Budget forecast of J$255.1 billion, although it exceeded the IMF target by J$10 billion for the April to December period.
The bulk of the budgeted underperformance in taxes arose from a shortfall of J$2.7 billion in pay-as-you-earn, J$1 billion in taxes on dividends, and J$5.7 billion in taxes on international trade.
To compensate for the overall shortfall in revenue, the Government has restrained recurrent and capital expenditure by J$7 billion and J$9.1 billion, respectively, EPOC said.
"While this is laudable fiscal management, it is concerning to EPOC, especially since the quarter ending March 2014 is the period when an increase in the primary balance of nearly J$50 billion will be required to meet the target of J$111.5 billion," stated the communiqué issued by the non-public sector members of the committee.
However, EPOC said the financial secretary has assured it that measures put in place in November 2013 had begun to produce positive results as evidenced by preliminary tax-collection numbers for January 2014 from Tax Administration Jamaica and the Jamaica Customs Department.
"EPOC encouraged the authorities to maintain vigilance in this respect because, if the challenging March targets are met, it will lead to increased confidence in the Jamaican economy by both local investors as well as the international community," the communiqué said.
It pointed out that the reform agenda for the quarter to March is very intensive and includes a number of vitally important legislative initiatives such as the adoption of a fiscal rule and broader tax reform, including modernisation of income tax, property tax, customs tariff, and social security.
It also includes the removal of zero rating for general consumption tax on many goods and establishing an initial and prudent reduction in personal tax rates, and an omnibus banking law to harmonise prudential standards across deposit-taking institutions as well as strengthening the corrective power of the Bank of Jamaica.
"The programme continues to be administered in an acceptable manner with the key targets being met to date," EPOC said.
"We are cautiously optimistic that the GOJ (Government of Jamaica) will meet the IMF targets for the fourth quarter ending March 2014. However, we remain concerned about the underperformance of the revenues," it added.