Abolish income, death tax
THE EDITOR, Sir:
Mr Joseph Matalon and the Private Sector Organisation of Jamaica, in the face of some rabid anti-business academics, are timidly making the argument that the productive sector, in addition to single-digits interest rates, should benefit from very low rates of income tax in order to facilitate increased investment and job creation.
Most financial experts appear to have accepted the fact that Jamaican businesses have suffered from too many decades of high interest rates and high taxes, but there are still some in academia and elsewhere who wish to stereotype the icons of the business sector as avaricious descendants of slave masters wishing to exploit the poor masses. Nothing could be further from the truth.
The truth is the abolishment of income tax as well as the death tax, would likely be a great boon for the Jamaican economy. It should be a major attraction for wealthy United States nationals and Jamaicans living overseas to choose Jamaica to build their dream retirement homes. Investment in tourism and all areas of industry and commerce could see a huge increase.
Jamaica's population would likely increase from the present 2.7 million to close to 4 million persons in a very short time. Rather than from babies born into poverty, this population increase would largely come from overseas retiring Jamaicans, as well as foreign nationals coming to retire and/or invest. So our local market would increase by close to one million well-to-do individuals, creating a boon for agriculture, food processing and other areas of manufacturing, banking, etc. Revenue from govern-ment consumption tax would also yield a very significant increase.
In the short term, we have to deal with a severe revenue gap. We are told that only 6,000 companies file income tax returns and only one-half of that amount file returns reflecting an amount owing to the Govern-ment. We are told that a very significant number of lawyers, doctors and other professionals do not file returns.
I believe the solution is simple: Introduce a system of registration fees for any company or any individual already engaged in or wishing to become engaged in any form of commercial enterprise or service. The smallest fee could be $1,000 for a start-up informal commercial trader, and the biggest $10 million for a mega conglomerate. The fee would have to be budgeted as an expense by the company or professional and must be paid regardless of whether there was a profit or loss sustained by the enterprise.
This fee could be paid in quarterly amounts but must be paid in full in the 12-month period. Non-payment would result in a three-month period within which the amount owing would have to be paid or the business or professional's office would be shuttered until payment was received.
Once in place, this system would allow the Government to plan its budget and expenditure with infinitely more accuracy. It would also allow businesses and professionals increased ability to budget and plan for expansion.
This commercial and professional registration fee would also be a much fairer tax policy and would result in a tremendous widening of the tax net with significant more persons contributing.
PAYE should eventually go the way of all income tax but could be kept in place for a year or two at a low 10 per cent rate.
So, is this the simple answer to putting our economy on a growth path? I am hoping that our trained economists will consider it seriously enough to give a feedback.