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Holness rebuts Matalon on tax proposal

Published:Monday | February 22, 2016 | 9:12 AMGary Spaulding
A section of the crowd that attended the Jamaica Labour Party mass meeting in Half-Way Tree on Sunday.

Leader of the Jamaica Labour Party (JLP), Andrew Holness, has questioned Joseph M. Matalon's opposition to the party's plan to exempt workers earning $1.5 million or less from personal income tax.

The tripartite plan will also see workers earning above $1.5 million and less than $5 million continuing to get the $592,800 income tax exemption, while salaries above $5 million will have no exemption. For the latter group, full earnings will be taxed at the rate of 25 per cent.

But Matalon said that the proposal, in its present format, was inequitable and distortionary.

Speaking at the JLP mass rally in Half-Way Tree on Sunday night, Holness contended that the Private Sector Working Group on tax reform which Matalon led came forward with a similar proposal four years ago.

"In 2011, when I became prime minister, the head of the Private Sector Working Group on tax reform, Joe Matalon, came to me with a proposal to further lift the income tax threshold from $440,000 to $1 million," said Holness.

This, Holness said, was part of the plan at the time, along with other tax-reform measures. "So as far back as then, this was being contemplated."

Continued Holness: "Furthermore, we have consulted with several local and international experts in the field and they all think it is the best way to stimulate our economy."

Declaring that this is basic economics, Holness said, "Our plan is based on one simple principle: You know how to spend your money better than Peter Phillips (finance minister over the last four years)."

Holness said, too, that several tax studies on Jamaica have all concluded that there be a move away from income taxes to consumption taxes.

Holness noted that in 2009, the JLP administration doubled the income tax threshold from $220,000 to $440,000.00. At that time, he said, 139,000 workers no longer paid income tax.

"That is one of the reasons why we were able to withstand the shock of the worst depression and oil price shock," said Holness. "It may sound new and novel to those who have short memories, but this is something that the Labour Party has done before and (has) been successful."

Holness said the JLP was confident in its numbers because they had been thoroughly researched.

He stressed that the plan would not effect government revenue, nor would it be inflationary, because there was productive capacity in Jamaica to respond to increased demand.

"In fact, there will be a positive impact for your household and for our economy," insisted Holness. "We are going to give back to the working people of Jamaica who have been made the working poor by the PNP (People's National Party)."

He reiterated that the plan would add up to $18,000 more in take-home pay per month for approximately 118,000 workers in the private sector and public sector earning less than $1.5 million.

"We will give you back the gas price savings that were taken away from you by the Peter Phillips tax scheme," he said. "The additional spending that you will do will result in more taxes to be collected in GCT, without an increase in GCT rate."