Kristen Gyles | Social side of the Budget

The current government has often been characterised as being tone deaf to the sentiments of languishing Jamaican poor, and is accused instead of being in the pockets of the wealthy. Some Jamaicans continue to face the brunt of poverty, but if we are honest, over the past two terms in office, the government has been demonstrating a clear poverty alleviation objective.

The recently concluded Budget Debate for the 2024/2025 financial year was another indication that the stigma of one party being socialist-leaning and the other being capitalist allies of the elite is nothing more than a paper label. This year’s $1.3 trillion budget is admittedly very charitable.

However, the Budget Debate presentations were pretty heavy and many of the details might not have been readily digested by the average Jamaican. It would be a shame if all the pre-election goodies wasted away due to general unawareness. Hopefully, this article will help to summarise some of the new budgetary allocations which should benefit Jamaica’s poorest.

One of the most impactful changes will be the removal of the requirement for student loan applicants to name a guarantor. For context, up until April 1, 2021, applicants to the Students’ Loan Bureau (SLB) were required to name two guarantors to be considered for a loan. During the 2021/2022 Budget Debate, the finance minister softened the requirement such that the SLB would require only one guarantor per applicant. Three years later, the requirement is being shelved altogether and since April 1, the SLB applicants no longer need to find any guarantors.

The guarantor system was onerous for children of low-income workers. To qualify as a guarantor, an individual would need to be gainfully employed in Jamaica for at least a full year. That is just not the reality for a significant percentage of Jamaicans, many of whom are seasonal workers and do not make enough to be considered ‘gainfully employed’.

The effect of the guarantor requirement was that it discriminated against children of the poorest people and forced them to go chasing after distant relatives, former teachers, principals and pastors who hardly remember them, and friends of friends of friends of friends, who would likely be unwilling to put their assets and earnings on the line as guarantors.

We know the guarantor requirement was an impediment for many of the poorest students because within 12 months of the government’s complete removal of the guarantor requirement for PATH beneficiaries in September 2023, student loan applications within that demographic increased by 185 per cent from 192 to 547.

PENSIONERS

Pensioners represent another vulnerable, yet oft-forgotten group that this time around wasn’t left out. The pension exemption and age relief exemption amounts have both been increased by considerable amounts.

The pension exemption for retirees 55 years and older and the age relief exemption for retirees 65 years and older were both previously $80,000 beyond the income tax threshold. They have now both been increased to $250,000. A pensioner who is 65 years or older would benefit from both exemptions and would therefore have previously been taxed only on the income they make above $160,000 more than the income tax threshold. The same pensioner will now be taxed only on the income they receive above $500,000 over the income tax threshold. To simplify, this translates into an additional $85,000 in annual savings for such a pensioner.

It’s easy to forget that pensioners have already paid their dues to society through (often) a long life of hard work and national service. To meaningfully incentivise retirement savings, hopefully, we will one day get to a point where pension payments are altogether exempted from income tax but, let’s not ruin a good moment.

The finance minister also announced that the government is working on introducing an unemployment insurance scheme that would render Jamaican workers eligible to receive an unemployment benefit for some period, equivalent to a specific percentage of the income they would have lost upon becoming unemployed.

SIMPLY NO SAVINGS

This may not be a big deal for people who earn enough to save a third of their salary every month, but many Jamaicans live hand-to-mouth. Job loss this month means they go hungry next month. There simply are no savings. This new system would be a game-changer for such persons.

Also of benefit to many low-income workers is the third increase to the national minimum wage in three years. As of June 1, 2024, the minimum wage will be increased from its current $13,000 to $15,000 per week.

Unfortunately, some Jamaicans continue to accept less than the minimum wage from their employers. Perhaps in June, the government should commemorate the increase with a big billboard inscribed, “If you are getting paid less than $15,000 per 40-hour workweek, your boss is a chopper!” because some Jamaicans seem genuinely oblivious to the reality of a minimum wage.

Apparently, a new reverse tax credit provision is also coming. What is clear so far is that the programme will see all registered taxpayers receiving a tax credit of $20,000 once they earn $3 million or less and have regular statutory deductions paid from their salaries. The $20,000 will be a one-time payment.

Last to be mentioned here, but by no means least, is the increase to the income tax threshold from $1.5 million to $1.7 million. The increase will result in savings of roughly $50,000 annually per person.

Overall, given the government’s boast that for the seventh year in a row there will be “no new taxes”… not bad at all.

Kristen Gyles is a free-thinking public affairs opinionator. Send feedback to kristengyles@gmail.com