Economist Dr Damien King has endorsed the move by the Jamaica Labour Party Government to finance its planned $1.5 million tax plan through an increase in Special Consumption Taxes (SCT).

Opening the budget debate yesterday afternoon, Finance Minister, Audley Shaw announced just over $13 billion in additional taxes to make up for the $12.65 billion the government will give up with the raising of the income tax threshold from $592,800 to $1 million come July 1.

Taking to social media network Twitter, following the presentation, Dr King indicated that the decision to finance the increased tax threshold by a shift to consumption tax, specifically on petrol and travel, is undoubtedly a good move.

He also indicated with this move, the tax burden has been shifted from what he describes as the ‘over-burdened formal sector workers to those who evade income taxes’.

The taxes include an increase in personal income tax on salaries over $6 million per year from 25 per cent to 30 per cent, an increase in SCT on petrol by $7 per litre, on cigarettes from $12 per stick to $14 per stick and an increase in departure tax from US$14 to US$35,

Raise in Threshold
Based on the revised $1.5M tax plan, the income tax threshold for ALL Pay As You Earn (PAYE) workers will be increased from $592,800 to $1.5 million.

In his address yesterday, the finance minister indicated that this will be implemented in two phases.

As a result, some 251,000 PAYE workers will benefit from the increased threshold.

Effective July 1, 2016, the first phase of the personal income tax threshold will increase to $1,000,272.

The second phase of the increase will result in a personal income tax threshold of $1.5 million, effective April 1, 2017.

“Right now there are 426,000 persons on the PAYE roll, but 125,000 are off it because they are below $592,800. In making this a threshold for everybody, it’s no longer 118,000 people that will benefit, it will now be 251,000 people. This is 133,000 more persons who will benefit,” the Minister pointed out.