Gas tax revenue not available for $1.5-m tax break promise — Shaw

Gas tax revenue not available for $1.5-m tax break promise — Shaw

On to plan ‘B’

BY KARENA BENNETT Business reporter bennettk@jamaicaobserver.com

Tuesday, March 29, 2016

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FINANCE Minister Audley Shaw yesterday accused the People’s National Party (PNP) of concealing the truth about the depletion of funds from the gas tax which the Jamaica Labour Party was banking on to implement the proposed $1.5-million tax break.


"You will recall we had suggested that part of the pay back for the $1.5-million tax break would be use of the tax on fuel — that was supposed to be a special fund that was set aside, couldn’t be touched. Well, now that we are at the National Heroes Circle, among other things I’ve found that the oil hedge was not set aside. That is already accounted for in the consolidated funds," Shaw stated.


"As it turns out now, it’s not set aside at all. So in other words, it’s not available as part of the solution to financing the tax break," he continued.


Shaw, who was speaking at the Private Sector Organisation of Jamaica President’s Forum at the Jamaica Pegasus in New Kingston, yesterday, stated that the Government’s recent discovery of the non-existent funds will trigger a new plan of action in enacting the promised tax break to employees.


In the run-up to the recent general election, the JLP placed at centrefold its plan to increase the tax threshold to $1.5 million, thus exempting individuals earning below the amount for Pay as You Earn (PAYE) tax.


Prime Minister Andrew Holness in his 10-point tax plan noted that the proposed plan would cost the country roughly $12.5 billion annually, but would be offset by the reallocation of revenues from the gas tax, the removal of exemption from individuals earning over $5 million annually, improved collections on arrears, additional general consumption tax from new spending and natural increases in PAYE.


The bulk of the revenues are however expected to come from the existing gas tax at $9.5 billion.


"The total amount is $9.5 billion, annualised it’s $6.4 billion," Shaw told the Jamaica Observer. "But we were assuming that $9.5 billion was there - it’s not. We have another plan, but I can’t tell you that here. We have another cabinet retreat starting tomorrow and of course, there is a budget debate that I have to address."


Phillips, in contending the statements made by Shaw, told the Business Observer that revenues from the gas tax were used for purchasing oil hedges which are still in effect. Up to January, the PNP Administration had spent US$27 million to insure against fluctuating oil prices on the world market.


"We had said at the very outset in relation to the tax proposal that it was not workable in the way that they are proposing. So he cannot now come and discover that it is not workable and that’s all I will say on the matter at this time," he stated in a telephone interview.


Nonetheless, Shaw is reassuring the country that the Government remains committed to tax reform, including increasing the PAYE threshold.


"I gave the unequivocal undertaking that regardless of what is being said, virtually on a daily basis, the commitment that we have made to employees that are earning less than $1.5 million - that commitment stands. It’s firm and irrevocable and even if it doesn’t start on April 1 because of the budgetary process, it will at least be retroactive to April," Shaw said.


"We believe that providing tax relief to this segment of Jamaicans – the working poor, among them are public sector workers who have been on a wage freeze — is not only fair, but will stimulate the economy. We are assessing a number of options to mitigate the fiscal impact of this measure and we are confident that it can be accommodated within the context of a broader tax reform."


wHe noted that in addition to the oil hedge money not set aside, other immediate challenges include the PetroCaribe debt buy-back which will cost the country US$110 million per year and the ailing sugar industry.


 


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