Phillips outlines caps on tax subsidies
The government is capping its discretionary waivers on taxes and duties at J$3.96 billion a year until it completes a new legislative regime to govern such concessions in accordance with its economic support agreement with the International Monetary Fund (IMF).
But the system breaks down the waivers into monthly tranches without a carry-forward clause, so that any amount not utilised in a given month is not available for later use.
"These caps are not cumulative," Finance Minister Dr Peter Phillips told journalists last Thursday.
With the interim arrangement, the government says it will waive up to J$270 million monthly - J$3 billion a year - in payments by charities.
The cap for government projects is J$70 million a month - J$840 million annually - while J$10 million monthly, or J$120 million is available for all other groups
Base data published on the finance ministry's website, waivers valued J$4.45 billion in the first 10 months of 2012 and approximately J$7.5 billion in 2011.
The waivers - a gift of the finance minister to businesses and charities - are a source of concern for the IMF and governance campaigners.
The Fund sees it as a significant leakage of revenue, especially given Jamaica deep fiscal crisis. Other critics argue that the system is arbitrary and open to political and other abuse.
Harmonise and modernise
The IMF insisted on the cutback even before the framing of a new law to govern charities and amend others to harmonise and modernise the system of incentives for businesses.
A public/private sector group, headed by one of Phillips' advisers, Dennis Morrison, is currently doing the groundwork for the new system, which the administration hopes to be in place by the end of the 2013-14 fiscal year that begins April 1.
"The adjustments that we are making on waivers constitute an explicit prior action in order to get the decision (on the support agreement) from the board of the International Monetary Fund," Phillips said.
He however made clear that existing statutory waivers and incentives and agreements that investors entered into "in good faith" would not be affected by the new regime.