$2-B CASH CHASM as tax revenues fall

BY CAMILO THAME Business co-ordinator Thamec@jamaicaobserver.com

Wednesday, February 01, 2012

A $2-billion chasm has opened in the Government's accounts as tax revenues have fallen below target over the last nine months, raising the spectre of additional spending cuts, higher taxes and more austerity for ordinary Jamaicans.

The new finance minister, Peter Phillips, has already promised cuts to the budget to improve the Government's fiscal position. But the latest figures suggest he may have to cut even more or put additional tax measures in place for the upcoming fiscal year, which begins on April 1.

Tax revenue for the nine months to December 31 was $15.4 billion, or 6.2 per cent lower than budgeted. Revenue in the last month of 2011 was even less than for the same month in 2010.

The decline was largely a result of companies paying less corporate tax on their profits so far this fiscal year when compared to a year earlier. Taxes on imports, another big earner for the Government, yielded only two per cent more revenue than they did a year earlier.

Government revenue from corporate income tax during the nine months to December 31 declined by four per cent to $16 billion, when compared to the same period in 2010.

On the other hand, PAYE earners forked out 20 per cent more cash, or $44.3 billion during the nine months to December 31, 2011, compared to $37 billion in the corresponding period a year earlier.

Proposed tax reform measures tabled in Parliament last year by then finance minister, Audley Shaw, are still far from implementation. They included plans to change the General Consumption Tax (GCT), implement a new tax at the ports, lower common external tariffs (CET) on hundreds of items, lower personal and corporate income taxes, and implement a new minimum business tax.

The Government is presently awaiting final recommendations from a private sector working group on tax reform, which could challenge the previous government's proposals.

One such recommendation is the application of a single customs administration fee (CAF) to all items (including the tourism sector, but excluding imports by bauxite firms, the government and diplomats) and an advanced GCT on all imports, which, it was estimated, could increase Government revenue by as much as $42.7 billion.

But with import levels down and the fact that GCT brings in nearly a third of its revenue, the Government may not be willing to make changes to the rate.

It was proposed that the rate be lowered from 17.5 per cent to 12.5 per cent, which would cut revenue by $16.2 billion, while at the same time lowering the number of GCT exempt items from the 41.7 per cent to 30 per cent of all goods and services, which would yield an additional $5.57 billion at the proposed new GCT rate.

The Government may also be unwilling to cut corporate income tax this year for political reasons, given that wage earners are carrying more of the tax burden.

The proportion of tax collected from corporations declined from 8.5 per cent last fiscal year to 7.8 per cent of total revenue this fiscal year, while PAYE earners contributed to 21.5 per cent this year compared to 18.8 per cent in the previous fiscal year.

The original proposals called for corporate tax to be lowered this year while no changes would be made to personal income tax before January 1, 2013.

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COMMENTS (17)

Real Estate
2/2/2012

How much did you collect per head on cruise ship guests? How much did you collect per head on arrivals - all arrivals at at all port of entry.
All these are justifiable taxation because it is this source that pays for security and other services for all who enter the country.
Have you collected any landing fees at the airports? Look into these things because maybe, just maybe, these taxes are not being collected.
How about vendor sales taxes? Have they paid?

Real Estate
2/2/2012

This is the prelude that they use when they want to approach the IMF.They are getting the people prepared.
Too bad because if Jamaica had a properly organized tax collection system there would be no need to borrow money. I think that if one were to look at what goes on it would show a lack of will to seriously address this issue. When will they use a computerized system to capture the data that would allow them to collect the taxes? Are some areas that should be paying being exempt from taxes?

Stephen Fox
2/2/2012

It is very simple. Collect the taxes, audit the businesses and professionals who are not reporting, issue business licenses so we have a way of tracking who is operating. Let the tax office and the police make sure that businesses have the proper license to operate. What is wrong with you people? The PAYE and the importers are low hanging fruit. Get with the program, pass some legislation, and stop vacillating.

Ever Dunk
2/2/2012

Any spending cuts at this time would be uncaring.

diehardr sickheads
2/1/2012

Milwoods interest growing daily,along withe the bleeeding at jutc and red ants thinking like a caveman.God help us .Unless the objective of JEEp is to producing goods for ten line of blackstarliners comming into kinston harbour for goods to be exported The The pnp will be seen as as bunch of talkers who give hand out their people to win elections.red ants during the 18 years of the pnp the worlds growth average 5% in the last four years it was -3%.

RED ANTS
2/1/2012

@Kerry! that is my purpose here,to keep the pressure on all you labourites.
@DT you are missing the point,you were saying all along while your government was in office that people should pay tax but now you learn your government was letting the big fish off the hook you blaming it on the recession.@Village Voice! I agree with you@ Maroon you forget the budget your government the argument was that it would repair Jamaica,Don't tell me you cannot recall.

Cookie Bulla
2/1/2012

Welcome to reality Portia Simpson Miller and cabinet

Kerry Morgan
2/1/2012

RED ANTS-- I have some words for you, SHUT THE HELL UP!! you're annoying as hell... You couldn't have chosen a better moniker.

D T
2/1/2012

As I have said a million times before, we are in the middle of one of the worst recession the world has ever seen. All the election promises will have to be thrown out, it is impossible for the govt to fulfil the promises they made. I hope the Ja people can see that whomever the elect to lead them cannot make miracles. The govt must come clean and tell Ja that there are very hard times ahead and we must make sacrifices to be better.

rohan thompson
2/1/2012

I suppose this was/is the bitter medicine that was being talk about? Ruff seas ahead folks buckle up.

0o k
2/1/2012

Red Belts!

Nejeeper KNG
2/1/2012

“A $2-billion chasm has opened in the Government's accounts as tax revenues have fallen below target over the last nine months, raising the spectre of additional spending cuts, higher taxes and more austerity for ordinary Jamaicans.” When some of us who pretends to know everything claims that austerity don’t work I truly question who is more or less informed. They are in full support of the JEEP that needs borrowed fuel but they can’t see why the country cannot borrow its way out of debt. Cont….

Village Voice
2/1/2012

I believe that if Jamaica collects the taxes due to her, she will be able to fund her programs without necessarily increasing taxes. People and organizations that earn money should pay taxes. No taxes - no permit/license.

maroon C.
2/1/2012

Mr illusionist welcome to reality.

Village Voice
2/1/2012

I am no expert on the situation, but I think part of the tax revenue shortage is due to the fact that the tax footprint is not big enough. Many groups earn quite a living in Jamaica without paying their fair share. Sound system operators and DJ's; doctors and other licensed professionals; small shop operators and street vendors should all pay regular taxes for the privilege of their livlihood. This will help to ease the weight on the PAYE system.

RED ANTS
2/1/2012

I know i will be call tribalist again but the same Bob Marley who sing Rat Race is the same Bob who sing Stiff Necked Fools.No wonder some of us prefer to remain in the dark with the green eyeglasses covering their sight and left their nose to see through.While such people were beating down PNP 18 yrs of corruption they failed to see the 4 yrs of JLP destruction.it was Shaw who was telling us about spreading tax across the board,at the same time big man was getting away.who is the real SELLOUT?

Jay Brown
2/1/2012

This is the bitter medicine that Andrew was speaking about, this doe not look good at all. As a country we must find a way to earn more.
PAYE workers cannot continue to bear the lion share of the burden. Hotel cannot continue to get duty free concession after the first ten years of operations, that system must change.

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GCT to go down, white rum prices going up

$2-B CASH CHASM as tax revenues fall