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Motorists,smokers hit hard
20% hike in tax revenue package BY JULIAN RICHARDSON Observer staff reporter richardsonj@jamaicaobserver.com
Saturday, April 12, 2008
Finance Minister Audley Shaw yesterday presented a tax revenue package of $262.7 billion, the brunt of which will be borne by motorists and smokers, who will contribute a total of $5.2 billion in increased taxes.
The $262.7 billion comprises the majority of the budgeted $303.6 billion in revenues and grants Shaw tabled in Parliament yesterday for the 2008/09 financial year.
Finance Minister Audley Shaw opening the 2008/2009 budget debate in Parliament yesterday. At 2nd right is Prime Minister Bruce Golding, while at right is Andrew Gallimore, a junior minister in the Government. (Photo: Garfield Robinson) The tax revenue package represents an increase of 20 per cent over last year's budget, which the Government is aiming to achieve through numerous tax reform initiatives focused on improving compliance, revenue protection and widening the tax net.
"The clear emphasis of my ministry is to improve collection of taxes due, significantly increase the collection of arrears due, re-establish the Revenue Protection Division (RPD) to protect major revenue windows from leakage through corruption and fraud and take steps to widen the tax net by encouraging new entrants into the system," said Shaw.
The finance minister, noting that Jamaica's compliance rate is a dismal 38 per cent across all tax types, compared to 60 to 80 per cent in more developed countries, said tax compliance will be the first priority in collecting the needed revenue to finance the budget and close the fiscal deficit gap, which is projected at 4.5 per cent of GDP for the 2008/09 financial year.
Shaw outlined numerous administrative reforms which he said were part of the "overriding principle" of "simplicity and equity" needed to improve tax collection. Some of the procedures that he said were being implemented this year were:
. The ministry will upgrade Revenue Collection Centres islandwide to make the facilities more accessible and user friendly. A new Revenue Centre is being established in Portmore;
. The Government will engage in a long-term IT strategy to support Tax Administration and Custom's function;
. Refocus the specific procedures of Tax Fraud to its single, principal objective of getting prosecution of those tax fraud cases; and
. Amend Tax and Custom laws to impose stiffer fines and penalties/imprisonment on any tax official arrested and convicted of aiding and abetting a taxpayer to evade taxes or commit fraud.
The minister also outlined a tax amnesty programme, the most comprehensive in over two decades, in which Government will waive interest and penalties across all tax types once the principal sum is paid. This is aimed at luring delinquent taxpayers into the tax net to help collect some of the whopping $138 billion in outstanding arrears plus interest and penalties owed to the Government.
"I also encourage taxpayers to talk with the tax representatives and work out arrangements, they are all good people trying to do their jobs properly," said Shaw of the amnesty which ends on October 31, 2008. "I want to invite all unregistered businesses and self-employed people to come into the tax net, no questions asked."
According to the minister, if taxpayers pay their full arrears in principal by June 30, 2008, the entire interest and penalties will be waived. After which, the following levels of waivers will apply:
. July 31, 2008 - 80 per cent
. August 31, 2008 - 50 per cent
. September 30, 2008 - 40 per cent
. October 31, 2008 - 20 per cent.
The Government expects to net a total of $2.9 billion in new tax measures, with a new tax on tobacco, the primary contributor to the top line, with an expected yield of $2.88 billion.
It is proposed to reform the tax structure on tobacco-related products and increase the special consumption tax (SCT) rate, starting April 14, 2008. The Government is proposing to eliminate the Additional Stamp Duty and Ad-valorem SCT on cigarettes; increase the tax from $2,300 to $6,000 per thousand sticks, and remit 20 per cent of the tax revenues from this source directly to the National Health Fund (NHF); and the Government will eliminate the Excise Duty.
Another heavy contributor to the net increase is the proposal to hike all motor vehicle licensing fees by 50 per cent, which is expected to yield some $1.165 billion. The effective date for implementation of this new measure is May 1, 2008.
Other new tax measures to be implemented this year are the increase in motor vehicle examination and driver's licence fees, expected to yield $250 million; increase in gun licences, expected to yield $100 million; and the restructuring of the motor vehicle rate structure, expected to yield $985 million.
The $489.5-billion budgeted expenditure tabled by Shaw two weeks ago is comprised of $140.3 billion in loan repayment, otherwise called amortisation. This leaves $349 billion to find, to which the tax revenues will be the major financing component in order to achieve the fiscal deficit target of 4.5 per cent.
During the financial year, Shaw said that the Government proposes to borrow $183.4 billion to cover the fiscal deficit and amortisation. Of this total, $130.7 billion, he said, is programmed to be raised from the domestic market and the remaining $52.7 billion from external sources. The programmed external funding is comprised of $9 billion from multilateral/bilateral sources for capital projects and the equivalent of $43.7 billion from the international capital market.
SUMMARY OF NEW TAX MEASURES FOR 2008/09 FISCAL YEAR
. Tax on tobacco $2.88 billion
. Increase in motor vehicle licence $1.165 billion
. Increase in motor vehicle examination, driver's licence $250 million
. Increase in gun licences $100 million
. Motor vehicle rate structure $985 million
REVENUE GAIN $5.38 billion
. Less threshold increase $575 million
. Less reduction in Transfer Tax and Stamp Duty $1.525 billion
. Less eliminating witholding tax on dividends $130 million
. Less Customs User Fees as tax credit $170 million
REVENUE FOREGONE ($2.4 billion)
Total of New Tax Measures $2.98 billion
20% hike in tax revenue package BY JULIAN RICHARDSON Observer staff reporter richardsonj@jamaicaobserver.com
Saturday, April 12, 2008
Finance Minister Audley Shaw yesterday presented a tax revenue package of $262.7 billion, the brunt of which will be borne by motorists and smokers, who will contribute a total of $5.2 billion in increased taxes.
The $262.7 billion comprises the majority of the budgeted $303.6 billion in revenues and grants Shaw tabled in Parliament yesterday for the 2008/09 financial year.
Finance Minister Audley Shaw opening the 2008/2009 budget debate in Parliament yesterday. At 2nd right is Prime Minister Bruce Golding, while at right is Andrew Gallimore, a junior minister in the Government. (Photo: Garfield Robinson) The tax revenue package represents an increase of 20 per cent over last year's budget, which the Government is aiming to achieve through numerous tax reform initiatives focused on improving compliance, revenue protection and widening the tax net."The clear emphasis of my ministry is to improve collection of taxes due, significantly increase the collection of arrears due, re-establish the Revenue Protection Division (RPD) to protect major revenue windows from leakage through corruption and fraud and take steps to widen the tax net by encouraging new entrants into the system," said Shaw.
The finance minister, noting that Jamaica's compliance rate is a dismal 38 per cent across all tax types, compared to 60 to 80 per cent in more developed countries, said tax compliance will be the first priority in collecting the needed revenue to finance the budget and close the fiscal deficit gap, which is projected at 4.5 per cent of GDP for the 2008/09 financial year.
Shaw outlined numerous administrative reforms which he said were part of the "overriding principle" of "simplicity and equity" needed to improve tax collection. Some of the procedures that he said were being implemented this year were:
. The ministry will upgrade Revenue Collection Centres islandwide to make the facilities more accessible and user friendly. A new Revenue Centre is being established in Portmore;
. The Government will engage in a long-term IT strategy to support Tax Administration and Custom's function;
. Refocus the specific procedures of Tax Fraud to its single, principal objective of getting prosecution of those tax fraud cases; and
. Amend Tax and Custom laws to impose stiffer fines and penalties/imprisonment on any tax official arrested and convicted of aiding and abetting a taxpayer to evade taxes or commit fraud.
The minister also outlined a tax amnesty programme, the most comprehensive in over two decades, in which Government will waive interest and penalties across all tax types once the principal sum is paid. This is aimed at luring delinquent taxpayers into the tax net to help collect some of the whopping $138 billion in outstanding arrears plus interest and penalties owed to the Government.
"I also encourage taxpayers to talk with the tax representatives and work out arrangements, they are all good people trying to do their jobs properly," said Shaw of the amnesty which ends on October 31, 2008. "I want to invite all unregistered businesses and self-employed people to come into the tax net, no questions asked."
According to the minister, if taxpayers pay their full arrears in principal by June 30, 2008, the entire interest and penalties will be waived. After which, the following levels of waivers will apply:
. July 31, 2008 - 80 per cent
. August 31, 2008 - 50 per cent
. September 30, 2008 - 40 per cent
. October 31, 2008 - 20 per cent.
The Government expects to net a total of $2.9 billion in new tax measures, with a new tax on tobacco, the primary contributor to the top line, with an expected yield of $2.88 billion.
It is proposed to reform the tax structure on tobacco-related products and increase the special consumption tax (SCT) rate, starting April 14, 2008. The Government is proposing to eliminate the Additional Stamp Duty and Ad-valorem SCT on cigarettes; increase the tax from $2,300 to $6,000 per thousand sticks, and remit 20 per cent of the tax revenues from this source directly to the National Health Fund (NHF); and the Government will eliminate the Excise Duty.
Another heavy contributor to the net increase is the proposal to hike all motor vehicle licensing fees by 50 per cent, which is expected to yield some $1.165 billion. The effective date for implementation of this new measure is May 1, 2008.
Other new tax measures to be implemented this year are the increase in motor vehicle examination and driver's licence fees, expected to yield $250 million; increase in gun licences, expected to yield $100 million; and the restructuring of the motor vehicle rate structure, expected to yield $985 million.
The $489.5-billion budgeted expenditure tabled by Shaw two weeks ago is comprised of $140.3 billion in loan repayment, otherwise called amortisation. This leaves $349 billion to find, to which the tax revenues will be the major financing component in order to achieve the fiscal deficit target of 4.5 per cent.
During the financial year, Shaw said that the Government proposes to borrow $183.4 billion to cover the fiscal deficit and amortisation. Of this total, $130.7 billion, he said, is programmed to be raised from the domestic market and the remaining $52.7 billion from external sources. The programmed external funding is comprised of $9 billion from multilateral/bilateral sources for capital projects and the equivalent of $43.7 billion from the international capital market.
SUMMARY OF NEW TAX MEASURES FOR 2008/09 FISCAL YEAR
. Tax on tobacco $2.88 billion
. Increase in motor vehicle licence $1.165 billion
. Increase in motor vehicle examination, driver's licence $250 million
. Increase in gun licences $100 million
. Motor vehicle rate structure $985 million
REVENUE GAIN $5.38 billion
. Less threshold increase $575 million
. Less reduction in Transfer Tax and Stamp Duty $1.525 billion
. Less eliminating witholding tax on dividends $130 million
. Less Customs User Fees as tax credit $170 million
REVENUE FOREGONE ($2.4 billion)
Total of New Tax Measures $2.98 billion
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