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Published: Friday | March 13, 2009
R. Anne Shirley, Business Writer
In the upcoming Budget exercise it is expected that the Government will unveil its plans for an acceleration of its tax reform and competitiveness enhancement programme.
The Matalon Report and more recent studies such as the 2006 study by ERI titled Jamaica: A Private Sector Assessment have identified that there is an urgent need to grapple with a number of factors that hinder growth and competitiveness in Jamaica. These include the need for:
An Overhaul of the Tax System:
Currently, there are five payroll taxes (including education and HEART taxes, which are basically additional income taxes) with separate rate and base structures and administrative systems. There is a general consensus that the system should be simplified by consolidating all of the payroll taxes into one tax, and to harmonise the various tax rates and base structures.
Attention also needs to be paid to making changes in the corporate tax structure. Currently, while the corporate tax rate is relatively high, this is offset in many instances by a whole raft of tax incentives/tax breaks to preferred sectors under 12 incentive acts.
The Stamp Duty Act is also very complicated and adds high transaction costs in a number of areas such as property transfers and registering security interests, increasing costs by as much as 20 per cent.
Simplification of Land Registration and Titling Procedures:
Most Jamaicans do not have a registered title to their property, and as a result they cannot use their land as collateral to finance their businesses. Jamaica's current system of land registration and titling process is extremely cumbersome and costly with transfer taxes and stamp duties accounting for approximately 13 per cent of the value of the transaction, and professional fees a further 12 per cent. These high transaction costs make the process too prohibitive for most individuals and small entrepreneurs.
Making the Business Registration Process Less Cumbersome, more affordable
Currently, the procedures required for registering and licensing a business in Jamaica is extremely time-consuming and costly overall. For years, the private sector has lobbied for a simplification of the process. And the current Golding-led administration has stated that one of its priorities is the creation of a type of 'one-stop-shop' for establishing a new business in Jamaica, and to lessen considerably the time and effort involved in completing the process.
One can, therefore, expect to see emphasis being placed on tax simplification and cost reduction of tax administration, as well as legislative and administrative reforms to the financial system in the new Budget.
In addition to these reforms, however, the Government is faced with a dilemma with regards to the tax package, which it will have to present. With limited borrowing options and a sure fall-off in foreign exchange earnings, it will be impossible for the Government to present the country with a Budget that does not include any new taxes. The options open include:
Some attention will also have to be paid to increasing NIS contributions, as well as a review of the NHT loan rates, and refund structure. The Opposition spokesperson on finance, Dr Omar Davies recently called for a creative restructuring of the NHT loan options and rates as a way to increase the construction of new houses, as well as to make home-ownership more affordable for more Jamaicans. This would suggest that the Government would have to reverse its NHT interest-rate policy which was introduced last year.
One other possibility is to introduce a special one-off tax on the corporate profits of the financial sector. With all of the major financial institutions reporting record profits, at a time when the rest of the economy is floundering, it will be very tempting for the Government to hit the banks and insurance companies with a tax on profits.
We await the presentation of the minister of finance.
http://www.jamaica-gleaner.com/glean...usiness14.html
R. Anne Shirley, Business Writer
In the upcoming Budget exercise it is expected that the Government will unveil its plans for an acceleration of its tax reform and competitiveness enhancement programme.
The Matalon Report and more recent studies such as the 2006 study by ERI titled Jamaica: A Private Sector Assessment have identified that there is an urgent need to grapple with a number of factors that hinder growth and competitiveness in Jamaica. These include the need for:
An Overhaul of the Tax System:
Currently, there are five payroll taxes (including education and HEART taxes, which are basically additional income taxes) with separate rate and base structures and administrative systems. There is a general consensus that the system should be simplified by consolidating all of the payroll taxes into one tax, and to harmonise the various tax rates and base structures.
Attention also needs to be paid to making changes in the corporate tax structure. Currently, while the corporate tax rate is relatively high, this is offset in many instances by a whole raft of tax incentives/tax breaks to preferred sectors under 12 incentive acts.
The Stamp Duty Act is also very complicated and adds high transaction costs in a number of areas such as property transfers and registering security interests, increasing costs by as much as 20 per cent.
Simplification of Land Registration and Titling Procedures:
Most Jamaicans do not have a registered title to their property, and as a result they cannot use their land as collateral to finance their businesses. Jamaica's current system of land registration and titling process is extremely cumbersome and costly with transfer taxes and stamp duties accounting for approximately 13 per cent of the value of the transaction, and professional fees a further 12 per cent. These high transaction costs make the process too prohibitive for most individuals and small entrepreneurs.
Making the Business Registration Process Less Cumbersome, more affordable
Currently, the procedures required for registering and licensing a business in Jamaica is extremely time-consuming and costly overall. For years, the private sector has lobbied for a simplification of the process. And the current Golding-led administration has stated that one of its priorities is the creation of a type of 'one-stop-shop' for establishing a new business in Jamaica, and to lessen considerably the time and effort involved in completing the process.
One can, therefore, expect to see emphasis being placed on tax simplification and cost reduction of tax administration, as well as legislative and administrative reforms to the financial system in the new Budget.
In addition to these reforms, however, the Government is faced with a dilemma with regards to the tax package, which it will have to present. With limited borrowing options and a sure fall-off in foreign exchange earnings, it will be impossible for the Government to present the country with a Budget that does not include any new taxes. The options open include:
- Hiking the tax on petroleum products.
- Increase in the 'sin' taxes - taxes on cigarettes, liquor, etc.
- Restructuring of the GCT - eliminating the zero-rating on some items, and moving the overall GCT tax rate.
- Increases in the rates of some of the other taxes such as Customs duties, licensing fees, stamp duty etc.
Some attention will also have to be paid to increasing NIS contributions, as well as a review of the NHT loan rates, and refund structure. The Opposition spokesperson on finance, Dr Omar Davies recently called for a creative restructuring of the NHT loan options and rates as a way to increase the construction of new houses, as well as to make home-ownership more affordable for more Jamaicans. This would suggest that the Government would have to reverse its NHT interest-rate policy which was introduced last year.
One other possibility is to introduce a special one-off tax on the corporate profits of the financial sector. With all of the major financial institutions reporting record profits, at a time when the rest of the economy is floundering, it will be very tempting for the Government to hit the banks and insurance companies with a tax on profits.
We await the presentation of the minister of finance.
http://www.jamaica-gleaner.com/glean...usiness14.html
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