Columns

Taxation Twilight Zone

ID: INTERACTIVE DIALOGUE

David Mullings

Sunday, February 17, 2013    

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MY column last week was titled 'The Twilight Zone', based on a discussion I had with a friend recently. After the surprise revelation of yet another tax package this past week, in a manner that I cannot support, I cannot help but feel that we really are in the Twilight Zone.

Over the last two years I have written a number of columns on comprehensive tax reform versus the piecemeal approach that has consistently been taken by successive PNP and JLP administrations. In my January 2011 column titled 'Many plans, little progress (part 2) - Tax reform', I quoted the following from the Medium Term Socio-Economic Policy Framework 2009-2012 that was supposed to guide the first three years of Vision 2030:

"Jamaica has one of the worst tax systems in the world, ranking 173rd out of 181 countries in the overall ease of paying taxes, 175th in the number of required annual tax payments, 148th in the time required to pay taxes and 133rd in total tax rate."

At the time of the column I was able to ask the then minister of finance, Hon Audley Shaw, about the many tax reform reports and his plans during a Mayberry Investors Forum. Back then he indicated that the time for studies and reports was gone, it was action time. He also pointed out that he had started to implement some of the reforms and hoped to accomplish more by the end of the year. No comprehensive reform ever took place and the JLP eventually lost the next election.

We most certainly have improved in the tax rankings due to some reforms that were implemented, but we have stalled and now risk slipping backwards.

For those with short memories, the JLP attempted to implement three successive tax packages in 2009 that amounted to $42 billion in new taxes. The reason for three packages was that each one underachieved the revenue goals.

The current PNP Administration is now undertaking a similar debt restructuring exercise of local debt (our international bondholders are not slated to lose any interest or be asked to participate, as far as I can tell so far) and another tax package. The PNP announced $19.3 billion in new taxes last May and now another $16.4 billion. This is separate from seeking to secure $11.4 billion per year for the next four years from the NHT, amounting to some $45 billion.

Based on history repeating itself so many times with tax packages, I most certainly feel that I am watching an episode of The Twilight Zone.

Once again, instead of comprehensive tax reform, which keeps getting lip service from both sides of the House, we are getting piecemeal tax policy, some of which cannot be called reform. To lower corporate taxes on non-regulated financial entities to 25 per cent in the recent past, and now wanting to add a five per cent surtax to bring the rate back up cannot be called reform.

It is well known that if Jamaica collected all the taxes owed we would be quite safe. Which administration is going to finally provide the Tax Administration and the Customs department with the budgets they need to improve collections?

It raises the question: are we really interested in improving collections?

David Mullings was the first Future Leaders representative for the USA on the Jamaica Diaspora Advisory Board. He can be found on Twitter at twitter.com/davidmullings and Facebook at facebook.com/InteractiveDialogue

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