Bankers' Association worried withdrawal tax will affect formal system
The Jamaica Bankers' Association has expressed concern that the recently announced tax on withdrawals will discourage persons from using the formal system.
The new tax, which will be a levy on withdrawals from deposit-taking institutions and security dealers, will be calculated on a graduated rate system, with withdrawals less than one million being subjected to a 0.1 per cent tax.
This measure will mean that persons withdrawing $1,000 will have to pay $1 in taxes. Conversely, persons withdrawing a sum greater that $20 million will have to pay a 0.05 per cent tax; those withdrawing more than five million, but less than $20 million will pay 0.075 per cent tax; and those taking one million to five million will pay 0.09 per cent tax.
In a statement this evening, the JBA also said it was worried that the Government has not presented a more equitable and sustainable strategy to meet the shortfall in revenue for the 2014/2015 fiscal year.
In the meantime, the association says it is willing to engage in dialogue with the Government with a view to identifying a "more balanced" approach.
SEE FULL STATEMENT FROM THE JBA
The JBA is concerned that the Government of Jamaica has not presented a more equitable and sustainable strategy to meet the shortfall in revenue for the 2014/2015 fiscal year.
Specifically, the JBA is concerned about the proposed levy of $2.250 billion by the Government on withdrawals from deposit-taking institutions and encashments from securities dealers.
The levy may discourage some individuals and businesses from utilizing the formal banking system, which not only conflicts with the country’s aim to achieve greater financial inclusion, but encourages greater activity in the informal economy.
The JBA is also concerned with the Government’s decision to raise an additional $1.788 billion with an increase by 80 per cent of the Asset Tax for deposit-taking entities regulated by the Bank of Jamaica (BoJ).
The solution cannot be to impose repeated and increasing demands on the financial sector that is the most compliant and one of the largest contributors to tax revenues. As it stands, financial institutions are already subject to the higher rate of Corporate Income Tax at 33.3 per cent, compared to 25 per cent for other companies.
Financial institutions also suffer much higher rates of Asset Tax, compared with all other companies.
These same financial institutions have already supported the Government’s debt reduction strategy through the Jamaica Debt Exchange and the National Debt Exchange.
It is the considered view of the JBA that a more prudent and equitable strategy would be for the Government to strengthen its efforts to increase tax compliance.
Presently, only 10 per cent of all registered companies in Jamaica file corporate income tax returns, a situation which is untenable if we are to move this country forward on the path of economic growth.
The JBA stands committed to meaningful dialogue with the Government that will result in a more balanced approach to solving our fiscal problems and nurturing opportunities.
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