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Collusion of the corrupt - Economic forum highlights tax policy differences
Finance Minister Audley Shaw on Thursday hit at Jamaica's corporate bosses, charging publicly that elements within their ranks have contributed to the rank corruption at the ports through collusion with Customs officials gone bad.
Shaw, who was addressing the Citi-sponsored PSOJ annual economic forum in Kingston and speaking to an international audience that included IDB head Luis Alberto Moreno, said given the invasive nature of the problem, his priority had to be reforming the administrative systems to net the billions of dollars that escape the treasury annually.
Hotbed of corruption
That, he said, had to take priority over any reforms to the tax structure.
"Customs has been a hotbed of corruption," Shaw said at the third annual economic forum, organised the Private Sector Organisation of Jamaica (PSOJ), an umbrella group for businesses here.
Private sector firms and their custom brokers, he added, have colluded with customs officers, "in robbing" the government of tax revenue.
Shaw on Monday had already signalled he expected the plan to clean up Customs would win him and Danville Walker no friends.
But he insisted it was an early imperative because of the tens of billions that is denied the treasury each year.
Shaw said again yesterday that an overhaul of the island's tax administration bureaucracy had to be his priority - rather than a fundamental reform of the tax structure - in the face of private sector corruption.
Jamaicans' debt
By government estimates, Jamaicans owe the treasury $130 billion to $138 billion in outstanding taxes, but stripped of penalties and interest, that figure would be $50 billion to $59 billion.
Shaw, in a blunt assessment of the problem before private sector leaders, suggested that the Customs Department, where on Monday he installed former direction of elections Danville Walker, as head, was the epitome of the problem, demanding specific attention.
Yesterday's forum was also addressed by Shaw's predecessor and now his shadow, Dr Omar Davies, as well as the president of the Inter-American Development Bank (IDB) Luis Alberto Moreno.
Shaw's openly frank defence of the administration's sequencing of tax reform came against the backdrop of private discussions with Moreno on the issue and the public call yesterday by PSOJ president, Christopher Zacca for lower taxes.
Top priority
Zacca, in opening the forum, had argued that tax reform should be among the top priorities of the nine-month-old Jamaica Labour Party (JLP) administration, but had stressed that the concentration ought not to be only on "increased collection".
"This must be in conjunction with rate reduction," Zacca said.
When Shaw spoke later, he said he been frankly told by Moreno, whom he described as a partner, that "we need to have tax reform before administrative reform".
But on that point, Shaw said, "I want to part company with him."
Four years ago a committee chaired by Joseph M. Matalon recommended sweeping changes to the tax structures, including lowering corporate income from 33 per cent to the 25 per cent enjoyed by employees and called for a substantial hike in the threshold at which workers are taxed. It also called for a bundling of the range of payroll taxes and for an overhaul of the system of incentives.
A handful of the measures were implemented by the previous government and while the new administration has indicated broad commitment to them, Shaw argued that implementing "the perfect tax matrix does that automatically ensure that you are going to up and accentuate the levels of compliance."
Basis of amnesty
It was in this context that Shaw held up the statistics that has been in recently become his staple and the basis of an amnesty that tax debtors who pay-up can get waivers on penalty and interest:
$130 billion in outstanding taxes;
Corporate income tax accounts for 68 per cent of the arrears;
One per cent of the firms account for 75 per cent of income tax;
Tens of thousands of eligible taxpayers, individuals and firms, pay nothing at all.
" I put it to you Mr President of the PSOJ, that we need to work together," Shaw said in a direct address to Zacca. "And the reason we need to work together is that 68 per cent of the tax arrears is corporate income tax arrears. Sixty-eight per cent!"
"We have got to change the cultural approach to tax evasion and tax avoidance," Shaw said. "And in doing that we have to ramp up the administrative systems and structures ... "
These changes, the minister said, have included the recruitment of new personnel, as in the case of Walker, and moves to enhance the computerisation of the system so that "technology can help "in the cross-fertilisation of information". "We are on a mission," Shaw said. "We have got to work on the administrative side."
Finance Minister Audley Shaw on Thursday hit at Jamaica's corporate bosses, charging publicly that elements within their ranks have contributed to the rank corruption at the ports through collusion with Customs officials gone bad.
Shaw, who was addressing the Citi-sponsored PSOJ annual economic forum in Kingston and speaking to an international audience that included IDB head Luis Alberto Moreno, said given the invasive nature of the problem, his priority had to be reforming the administrative systems to net the billions of dollars that escape the treasury annually.
Hotbed of corruption
That, he said, had to take priority over any reforms to the tax structure.
"Customs has been a hotbed of corruption," Shaw said at the third annual economic forum, organised the Private Sector Organisation of Jamaica (PSOJ), an umbrella group for businesses here.
Private sector firms and their custom brokers, he added, have colluded with customs officers, "in robbing" the government of tax revenue.
Shaw on Monday had already signalled he expected the plan to clean up Customs would win him and Danville Walker no friends.
But he insisted it was an early imperative because of the tens of billions that is denied the treasury each year.
Shaw said again yesterday that an overhaul of the island's tax administration bureaucracy had to be his priority - rather than a fundamental reform of the tax structure - in the face of private sector corruption.
Jamaicans' debt
By government estimates, Jamaicans owe the treasury $130 billion to $138 billion in outstanding taxes, but stripped of penalties and interest, that figure would be $50 billion to $59 billion.
Shaw, in a blunt assessment of the problem before private sector leaders, suggested that the Customs Department, where on Monday he installed former direction of elections Danville Walker, as head, was the epitome of the problem, demanding specific attention.
Yesterday's forum was also addressed by Shaw's predecessor and now his shadow, Dr Omar Davies, as well as the president of the Inter-American Development Bank (IDB) Luis Alberto Moreno.
Shaw's openly frank defence of the administration's sequencing of tax reform came against the backdrop of private discussions with Moreno on the issue and the public call yesterday by PSOJ president, Christopher Zacca for lower taxes.
Top priority
Zacca, in opening the forum, had argued that tax reform should be among the top priorities of the nine-month-old Jamaica Labour Party (JLP) administration, but had stressed that the concentration ought not to be only on "increased collection".
"This must be in conjunction with rate reduction," Zacca said.
When Shaw spoke later, he said he been frankly told by Moreno, whom he described as a partner, that "we need to have tax reform before administrative reform".
But on that point, Shaw said, "I want to part company with him."
Four years ago a committee chaired by Joseph M. Matalon recommended sweeping changes to the tax structures, including lowering corporate income from 33 per cent to the 25 per cent enjoyed by employees and called for a substantial hike in the threshold at which workers are taxed. It also called for a bundling of the range of payroll taxes and for an overhaul of the system of incentives.
A handful of the measures were implemented by the previous government and while the new administration has indicated broad commitment to them, Shaw argued that implementing "the perfect tax matrix does that automatically ensure that you are going to up and accentuate the levels of compliance."
Basis of amnesty
It was in this context that Shaw held up the statistics that has been in recently become his staple and the basis of an amnesty that tax debtors who pay-up can get waivers on penalty and interest:
$130 billion in outstanding taxes;
Corporate income tax accounts for 68 per cent of the arrears;
One per cent of the firms account for 75 per cent of income tax;
Tens of thousands of eligible taxpayers, individuals and firms, pay nothing at all.
" I put it to you Mr President of the PSOJ, that we need to work together," Shaw said in a direct address to Zacca. "And the reason we need to work together is that 68 per cent of the tax arrears is corporate income tax arrears. Sixty-eight per cent!"
"We have got to change the cultural approach to tax evasion and tax avoidance," Shaw said. "And in doing that we have to ramp up the administrative systems and structures ... "
These changes, the minister said, have included the recruitment of new personnel, as in the case of Walker, and moves to enhance the computerisation of the system so that "technology can help "in the cross-fertilisation of information". "We are on a mission," Shaw said. "We have got to work on the administrative side."