Home Businessuite Markets In My View The GOJ Should Focus On Improving Tax Compliance and Have Confidence In Its Plan To Do So – Jain
In My View The GOJ Should Focus On Improving Tax Compliance and Have Confidence In Its Plan To Do So – Jain

In My View The GOJ Should Focus On Improving Tax Compliance and Have Confidence In Its Plan To Do So – Jain

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Noted Jamaican Financial Analyst Sushil Jain offers his views and comments on the Budget Speech and the Revenue Measures recently tabled by the Jamaican Government.

1. Encouraging Points about Actions taken from the Speech:

• Restoration of the Junior Market tax incentive

• Granting of two new banking licenses

• Approval of the Mobile Money Solutions

• Additional funding of 6 Billion for MSMEs through DBJ reduction of Minimum Capital Test for Insurance Companies from 250% to 150% releasing 36Billion for investments

• Reduction of interest rate on loans for some specified courses from 9.5% to 6%

• Plans for: Private Sector Pension Reform, Accelerating Financial Inclusion, Banking Services Code of Conduct, Study of the Efficiency of Commercial Banks, Financial Services Consumer Protection Agency, Review of the Bank of Jamaica Act to adopt structural limits on lending to the government, Micro Lending Act, Public Sector Pension Reform, action on Dormant Accounts in the financial institutions, etc.

These are encouraging and steps in the right direction.

2. Revenue Measures:
• Increase in taxes on fuel, vehicle related fees, tobacco and alcoholic beverages – these are normal “routine items additional taxes “which the governments use to fund their budgets .Increasing them has become like a routine and people are not surprised to hear about them.

• Increase in property tax -this has been long overdue and was expected.

• Reduction in the threshold for exemption from GCT on electricity – this was not expected and is not necessary. This should be withdrawn.

• Imposition of GCT on Group Health Insurance – not a good move and should be withdrawn.

Overall impact of the Revenue Measures on the people is unlikely to be significant.

3. What is missing?

The presentations and the revenue measures give the impression of a focus on “routine balancing the books” and not of a “growth oriented budget”. It gives the impression that the main focus is on closing the gap caused by the increase in the income tax threshold. I wonder if it fully takes into account the automatic increase in tax collection due to increase in employment and growth in the economy.

The following are some of my concerns:

• No clarity about the focus on growing the economy

• No priority for simplifying the tax system, in fact people are finding it more difficult to file their returns because of the complexity of forms/the differing interpretations of terms used .The GCT is so complex that people have difficulty in dealing with it. Why can it no so simplified which was the original intention when it was introduced?
• No announcements about any new /special incentives for increasing exports or reducing imports

• No confidence in the government’s ability to collect the arrears of income taxes amounting to 234 B and property taxes amounting to 13 B. If the GOJ had confidence in improving compliance, they would have said that even if we collect 10% of those arrears we need not impose any new taxes. If we collect more, then we can reduce some taxes.

• Even if the GOJ is confident of collecting 1% more of the arrears, they can withdraw the proposed change in GCT on residential electricity and on Group health Insurance. I urge them to do so.

• No clear timetable for the Public Sector Reform and reduction of the Wage/GDP ratio to less than 9%

• No clear medium term plan regarding the GCT on residential consumption of electricity

• half -hearted reduction in interest rate on student loans only for some courses .The reduction should have been across the board for all courses. In any case, the interest rate of 9.5% for student loans is high .Why not reduce the interest rate to 7% for student loans for all courses.

• Unnecessary imposition of GCT on Group Health Insurance -what is the rationale for this? Do we want to discourage companies from providing this insurance? It will be advisable to withdraw this.

• No plan /timetable about the payment of withholding tax refunds that the GOJ owes to pension funds and others

In my view the GOJ should focus on improving the tax compliance, have confidence in its plan to do so and withdraw the proposed reduction in zero-rate electricity threshold and the imposition of GCT on Group Health Insurance.

Sushil