Corporate tax gap
McPherse Thompson, Assistant Business Editor
With corporate tax running $2.4 billion below target, the co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, said yesterday that there is a need for an explanation as to why businesses, especially those in the financial sector, have been reporting increased profits but the tax intake from the stream is underperforming.
"Tax Administration Jamaica (TAJ) has undertaken to review the corporate tax intake and advise EPOC at its next meeting as to why there is that gap," Byles said, while addressing a media briefing at Sagicor Life Jamaica, New Kingston.
"When I look at the listed companies on the (Jamaica) Stock Exchange, particularly the big ones that pay the most taxes, which is the financial sector, I believe, if I am correct, most if not all of them have increased profits from last year, so they should be paying more taxes," Byles said.
"Even the non-financial listed companies, many of them are showing improved results. So it's a bit of a conundrum to me that the tax intake should be so low."
Tax revenues for the quarter were $1.5 billion above target, but grants were $2 billion short.
Byles explained that grants are funds provided by various international agencies, "and I think what has happened is that the actual disbursements haven't synced up with the budgeted receival of those funds."
However, he said the Ministry of Finance "feels pretty confident that by September, we will catch up with this target."
half billion improvement
Pay As You Earn taxes, which lagged behind the target for most of last year, performed ahead of budget by $578.2 million during the June quarter, as did tax on interest and Special Consumption Tax.
General Consumption Tax collection was down by just over $1.5 billion.
On the expenditure side, Byles said, "the Government was pretty frugal", achieving a $6.3 billion under expenditure in all the major categories - wages, which contributed $1.1 billion; programmes, which contributed $2.3 billion; and capital projects, which contributed $3.1 billion to compensate for the revenue shortfall.
The fiscal deficit - the primary balance plus interest payments - of $14.2 billion was $2.8 billion better that the budgeted deficit of $17 billion.
Meanwhile, Jamaica surpassed all the critical targets under the International Monetary Fund (IMF) agreement for the first quarter of fiscal year 2014/15, which ended in June, Byles said yesterday.
EPOC's outlook, based on the data, "is quite positive," he said.
Byles noted that the IMF team is currently in Jamaica to conduct the June quarter review under the four-year programme. "I expect, based on the data that has been published by the Ministry of Finance and the Bank of Jamaica, that we will pass this first-quarter review."
For the June quarter, the primary balance of central government stood at $18.5 billion, $3 billion above the $15.5 billion target. The Net International Reserves stood at US$1.37 billion, almost US$220 million more than the US$1.16 billion targeted.