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EDITORIAL - Good move, PSOJ

Published:Thursday | March 22, 2012 | 12:00 AM

THE LEADERSHIP of the Private Sector Organisation of Jamaica (PSOJ) can't be accused of any unwillingness to, as it were, put their money where their mouths are.

So Mr Joseph M. Matalon, the organisation's president, announced on Tuesday that the PSOJ's council, its top decision-making body, had passed a resolution that would demand all members to show evidence of being tax compliant.

Failure of firms to meet their obligations, he suggests, risk being suspended, or kicked out of the PSOJ. Although we suspect that there will have to be adjustments to the PSOJ's constitution if enforcement is to be placed beyond legal challenge, members are unlikely to have any disagreement with any such change.

Its immediate importance, however, is the moral marker that Mr Matalon and his executive resolved to set out. That is, leadership by example, rather than a disconnect between word and deed.

The PSOJ, and more specifically Mr Matalon, has been at the forefront of the so-called Private Sector Working Group (PSWG) that has, up to now, articulated the most thoughtful set of tax- reform proposals.

Its package include a downward adjustment of the general consumption tax (GCT), the elimination of GCT exemptions, underpinned by direct subsidies to those most at risk, and a tiered band for personal income tax.

Unsurprisingly, many critics have rounded on the proposal to lower corporate income tax from 33.3 per cent to 14 per cent, glossing over its element that there would be another 10 per cent tax on firms if they distributed their profits to shareholders.

Collect from firms

Additionally, the group has urged the Government to collect its taxes from firms. It is in that context that the PSOJ's resolution is significant.

Indeed, as the working group pointed out, of the more than 62,000 registered firms in Jamaica, only 28 per cent are registered for tax purposes, and a mere 10 per cent, a bit over 6,000, file income tax returns. Only 3,000 firms, five per cent of the registered companies, ever show a profit and therefore pay corporate income tax.

That as many as 70 per cent of the incorporated firms don't appear on the tax register is surprising. So, too, is the fact only 35 per cent of those that are registered file tax returns. Of those that file, only half, roughly 3,000, report profit and actually pay income tax.

Legitimate tax avoidance is one thing, but illegally 'beating' the system is quite another - the point being made by the PSOJ as it insists that all Jamaicans pay their fair share. The PSOJ's council's deserves support for its resolution.

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