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By Camilo Thame Business Co-ordinator thamec@jamaicaobserver.com
Friday, October 23, 2009
Finance Minister Audley Shaw yesterday signalled that the Government will reduce the amount of waivers granted at the nation's ports as part of tax reform measures to be implemented next year.
"For every J$1 billion that is collected at customs, $500 million is given up in waivers," said the finance minister at Scotia DBG Investments corporate investment seminar held yesterday at the Terra Nova Hotel in Kingston. "This cannot continue."
Finance Minister Audley Shaw shares a word with Scotia DBG Investments CEO Anya Schnoor at the investment house's corporate investment seminar held yesterday at the Terra Nova Hotel in Kingston. (Photo: Garfield Robinson)
Meanwhile, an IMF team is expected to arrive in Jamaica next week, but Shaw still insists that the IMF's board decision will be reached next month, even while the Inter-American Development Bank (IDB) has not yet completed its study on Jamaica's tax expenditure, which should quantify actual losses associated with waivers and other preferences.
"As of now, I still have November on my radar," the finance minister declared yesterday morning.
Shaw said the IDB report will be complete by next month - the same time the IMF's board decision is expected - and will form part of the basis of tax reform measures to be implemented the next fiscal year.
Even then, the finance minister yesterday insisted that the slate of reforms, largely based on the report of the tax reform committee led by Joseph Matalon - now called the Matalon Report - had already been laid out although the implementation of them were deferred to next year because "it is not tidy" to put in place by mid-year.
Shaw's statement on waivers implies that $42.5 billion, or approximately 45 per cent of the fiscal deficit projected for the current fiscal year will be given up this year alone.
For the five months to August 31, 2009, the Government collected $28.3 billion from taxes on international trade and expects to earn $85 billion in all for the full fiscal year to March 31, 2010 should revenue for the rest of the year fall in line with original projections.
According to the Matalon Report, the Government gives up the equivalent of 60 per cent of all its tax dollars through exemptions and incentives, or at least that was so in 2003.
This fiscal year, that would equate to over $150 billion.
Then, the Matalon Report stated that 56 cents was given up for every dollar collected from tax on international trade but equated the cost of exemptions and zero-ratings on GCT at 118.3 per cent and 77.7 per cent of total domestic GCT, respectively. That would equate to $55 billion and $37 billion, respectively, this year.
The Matalon Report also estimated tax incentives given to companies translated into 39 per cent of corporate income tax, which this year would equate to $11.4 billion.
While tax incentives to companies translated into smaller tax expenditures than the losses associated with waivers and exemptions, Shaw said he did not agree with the idea of removing such incentives, citing that investments in modernisation and expansion should be rewarded.
Last month, the finance minister had said that tax reform next year will be aimed at improving compliance, broadening the tax base, reducing the level of incentives and relieving provisions with respect to various tax codes, amalgamation of payroll deductions, rationalisation of public bodies, which can be a major drain on the GOJ budget through divestment mergers, restructuring and some closures.
This is the first signal he has given that points to Government's specific plans to significantly increase revenues.
But the statement comes ahead of the International Monetary Fund's (IMF's) decision on whether it will grant the Government full access to a US$1.2-billion stand-by agreement.
The IMF has for years, through its Article IV Consultation Reports, called for the Government to implement tax reform measures, which would include "reduce exempted items from the General Consumption Tax (GCT), retire or substantially eliminate discretionary exemptions for imports and raise specific taxes eroded by inflation", according to its 2007 report.
http://www.jamaicaobserver.com/magaz...TY_WAIVERS.asp#
Friday, October 23, 2009
Finance Minister Audley Shaw yesterday signalled that the Government will reduce the amount of waivers granted at the nation's ports as part of tax reform measures to be implemented next year.
"For every J$1 billion that is collected at customs, $500 million is given up in waivers," said the finance minister at Scotia DBG Investments corporate investment seminar held yesterday at the Terra Nova Hotel in Kingston. "This cannot continue."
Finance Minister Audley Shaw shares a word with Scotia DBG Investments CEO Anya Schnoor at the investment house's corporate investment seminar held yesterday at the Terra Nova Hotel in Kingston. (Photo: Garfield Robinson)Meanwhile, an IMF team is expected to arrive in Jamaica next week, but Shaw still insists that the IMF's board decision will be reached next month, even while the Inter-American Development Bank (IDB) has not yet completed its study on Jamaica's tax expenditure, which should quantify actual losses associated with waivers and other preferences.
"As of now, I still have November on my radar," the finance minister declared yesterday morning.
Shaw said the IDB report will be complete by next month - the same time the IMF's board decision is expected - and will form part of the basis of tax reform measures to be implemented the next fiscal year.
Even then, the finance minister yesterday insisted that the slate of reforms, largely based on the report of the tax reform committee led by Joseph Matalon - now called the Matalon Report - had already been laid out although the implementation of them were deferred to next year because "it is not tidy" to put in place by mid-year.
Shaw's statement on waivers implies that $42.5 billion, or approximately 45 per cent of the fiscal deficit projected for the current fiscal year will be given up this year alone.
For the five months to August 31, 2009, the Government collected $28.3 billion from taxes on international trade and expects to earn $85 billion in all for the full fiscal year to March 31, 2010 should revenue for the rest of the year fall in line with original projections.
According to the Matalon Report, the Government gives up the equivalent of 60 per cent of all its tax dollars through exemptions and incentives, or at least that was so in 2003.
This fiscal year, that would equate to over $150 billion.
Then, the Matalon Report stated that 56 cents was given up for every dollar collected from tax on international trade but equated the cost of exemptions and zero-ratings on GCT at 118.3 per cent and 77.7 per cent of total domestic GCT, respectively. That would equate to $55 billion and $37 billion, respectively, this year.
The Matalon Report also estimated tax incentives given to companies translated into 39 per cent of corporate income tax, which this year would equate to $11.4 billion.
While tax incentives to companies translated into smaller tax expenditures than the losses associated with waivers and exemptions, Shaw said he did not agree with the idea of removing such incentives, citing that investments in modernisation and expansion should be rewarded.
Last month, the finance minister had said that tax reform next year will be aimed at improving compliance, broadening the tax base, reducing the level of incentives and relieving provisions with respect to various tax codes, amalgamation of payroll deductions, rationalisation of public bodies, which can be a major drain on the GOJ budget through divestment mergers, restructuring and some closures.
This is the first signal he has given that points to Government's specific plans to significantly increase revenues.
But the statement comes ahead of the International Monetary Fund's (IMF's) decision on whether it will grant the Government full access to a US$1.2-billion stand-by agreement.
The IMF has for years, through its Article IV Consultation Reports, called for the Government to implement tax reform measures, which would include "reduce exempted items from the General Consumption Tax (GCT), retire or substantially eliminate discretionary exemptions for imports and raise specific taxes eroded by inflation", according to its 2007 report.
http://www.jamaicaobserver.com/magaz...TY_WAIVERS.asp#