Gap in budget may swallow taxpayers
Daraine Luton, Senior Staff Reporter
TAXPAYERS COULD be called upon to provide up to $9.3 billion in new taxes next fiscal year, even as Finance Minister Dr Peter Phillips declared that no new taxes would be imposed on Jamaicans in a bid to cover the $11 billion shortfall anticipated for this financial year ending March 31.
The extent of the budgetary gap was disclosed yesterday by Financial Secretary Devon Rowe as he provided Parliament's Committee on Taxation Measures with a forecast of the country's fiscal programme for the 2014-2015 fiscal year.
"The outlook for 14-15 (2014-2015) is indicating that there will be a requirement for the meeting of the 7.5 per cent of GDP primary balance that will amount to $9.3 billion, and that arises from the revenue shortfall this year feeding into next year, and the forecast would, therefore, be impacted by the base of revenue feeding into 2014-2015," Rowe said.
Revenues as at November 2013 were running $11 billion behind target, and Rowe said it was unlikely that the projected revenue for the financial year would be realised.
Phillips said yesterday that there would be no new taxes to make up for the shortfall, saying the Government preferred to adopt expenditure cuts rather than revenue-raising measures.
Phillips made the comment following questions from Opposition Spokesman Audley Shaw during the committee meeting.
"I am not recommending it, but I am not unaware of the tightness of the last quarter, especially in attaining the primary balance target that is established for this fiscal year," Shaw said.
Blueprint on tax reform
In the meantime, the Government has tabled a blueprint on tax reform, which outlines several strategies the Government intends to utilise over the short to medium term to raise tax revenue.
"The blueprint represents the next tier and broader tax reform initiatives to provide for the regulator and administrative framework over the next three fiscal years," Rowe said.
The paper, which was laid before the Committee on Taxation Measures, points to several proposed tax reforms, many of which will require legislative support.
Among the reforms is to allow start-up companies to immediately claim GCT refund for excess credit. A bill is to be tabled in Parliament in June to ensure this comes to fruition. The Government hopes it will result in an increase in business facilitation.
The Government has also indicated that by June, it intends to repeal a provision in the GCT Act, which currently permits the deferral of GCT chargeable on the importation of raw materials, intermediate goods and consumables by manufacturers carrying on a taxable activity until a GCT return is filed. The aim of the reform is to reduce any possibility of tax leakage.
The June tax measures will also see the curtailment of the availability of the reduced rate of SCT by limiting the CIF value to US$35,000 afforded to pick-up trucks for agricultural activities. Currently, persons importing luxury pick-up vehicles benefit from lower tax rates.
Rowe said that for next fiscal year, wages would remain relatively flat, so, too, capital expenditure as a percentage of GDP.