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Davies backs Shaw's flat tax

Published:Friday | April 23, 2010 | 12:00 AM

Arthur Hall, Senior Staff Reporter

Finance minister Audley Shaw is getting the backing of an unlikely ally for his controversial proposal to introduce a flat tax to capture small-business operators and artisans.

Opposition Spokesman on Finance and former Finance Minister, Dr Omar Davies, yesterday announced that he supported, in principle, the idea which is still to be fleshed out by the Government.

Shaw had made the proposal during the just-concluded Budget Debate, drawing immediate criticisms from some commentators, who noted that taxi operators, plumbers and carpenters who eke out a living could be subject to this flat tax on their incomes.

The finance minister is still in talks with sector interests on how the tax would work but he can expect the support of Davies, one of his chief critics.

"I commend and support the flat tax. I think that is one of the things I left for him to follow up on," Davies told a Jamaica Chamber of Commerce post-Budget forum yesterday.

The former finance minister hinged his support on the need to pull the informal sector into the formal economy.

Gentle introduction

"We need to bring a significant percentage of the labour force into the formal sector. The flat tax is a gentle introduction towards formalising a significant percentage of the population that operates outside of that," added Davies, as he argued that a portion of the tax should go toward the National Insurance Fund.

Davies made it clear that not only persons such as the taxi driver or bus operator should be targeted, as he noted many formal entities were managing to avoid the tax net.

"Those who can't avoid it or the PAYE people feel set up on because the Government and the state come back to them time and time again because they are the only ones they can catch without much effort."

Davies announced his support for the tax after telling the JCC forum that the country needed to start "depoliticising" obvious fiscal policy choices.

He pointed to the decision of the PNP not to take to the streets last year when the Government hiked the tax on fuel, noting that the he supported the position which was strongly defended by Opposition Leader Portia Simpson Miller.

"I could not, but with hypocrisy, oppose what would be a logical tax. There can't be a situation where a country which imports every single gallon of gasolene would have a price almost equivalent to every major oil producer," Davies said.

Shaw, who was also present at the JCC forum, was quick to express his gratitude for the position adopted by the man he replaced as finance minister.

"I am appreciative of the comment of the former minister in relation to the flat tax and how that can be used as an instrument of introducing the discipline of participation in the taxation process," Shaw said.