Letters to the Editor

Gov't can't tax the country into prosperity

Thursday, April 24, 2014    

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Dear Editor,

Few would argue that we, as a nation, are where we could be. Jamaica needs a politically engaged middle class as the corrective force. As a group, the middle class has often seemed unmoved by Jamaica's many societal problems; more determined to remain secluded inside the comfort of its self-imposed bubble.

Each day more people who identified themselves as middle class have had to face the unnerving truth that they are now on the brink of extinction. The middle class has vast economic clout, yet often remains politically marginalised in a huge democracy where the politically illiterate masses still dominate the outcome of elections and the moneyed class has the ear of politicians. For politicians, Jamaica has primarily become a site of extraction, a fight over scarce benefit and spoils while trying to secure legitimacy and power.

The minister of finance, on April 17, 2014, glibly introduced $6.7 billion of new taxes. Some $2.25 billion is expected to come from the aptly dubbed withdrawal tax: "The new tax, which will be a levy on withdrawals from deposit-taking institutions and security dealers, will be calculated on a graduated rate system, with withdrawals less than one million being subjected to a 0.1 per cent tax and five million or more subjected to 0.09 per cent tax."

I find it very troubling that the Government would implement new taxes while reportedly not collecting $5.4b from 11 entities. The response offered by various government officials, which include Her Worship Angela Brown Burke and Damion Crawford, suggest that it is a nominal amount and we can afford it, but can we really?

Consider that, according to the 2013 recommendations of the Incentive Working Group, there were over 62,000 companies registered with the Companies Office in 2012, 10,239 corporate income tax returns were filed for year of assessment 2011; and of those only 3,780 returns reported a profit. We have a significant tax compliance issue.

Instead of implementing reform that would ease the burden on the compliant taxpayers, the government has taken the easy route -- tax us some more and figure out what to do with the evaders some other time. Entrepreneurship is stifled by this onerous taxation. The determined entrepreneur must manoeuvre bureaucratic red tape, underpaid and demotivated public servants. We cannot tax our country into prosperity, neither can we target the same set of individuals. The only solution to growth is a vibrant middle class; one that does not bear the disproportionate tax burden and has no unreasonable bureaucracy.

I implore the minister to consider among his options a flat GCT of 12.5% to all items; lowering the income tax rate to encourage the almost two thirds of the workforce who are unregistered to become a part of the income tax network; removing the anti-business Minimum Business Tax (MBT) which became effective April 1, 2014; and lowering the corporate tax rate to boost compliance.

We have complained enough. Perhaps it's time for some type of action.

Dayton Lawton

daytonl@gmail.com

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