'Don't prescribe the medicine in one dose'

Businesswoman urges phased application of GCT on tax-free food items under reform

BY ALICIA DUNKLEY Observer senior reporter dunkleya@jamaicaobserver.com

Friday, February 10, 2012

BUSINESS operator Ena Wong Sam has urged the Government to consider phasing the proposed application of General Consumption Tax (GCT) on the now exempt and zero-rated items given the potential impact on the poor.

"It would not be wise to apply the GCT to the tax exempt and zero-rated items all at once, but to implement it gradually. You should not prescribe the medicine in one dose but divide it into four doses and this should cover the four-year period that it should be paid in," Wong Sang told the newly reconvened Jamaica Parliamentary Tax Committee during its meeting Wednesday.

The committee was established in July last year under the previous Jamaica Labour Party government and had begun calling on business and professional organisations, civic groups, trade unions, academics, workers and the general public to submit, in writing, their comments and suggestions on the Tax Reform Green Paper which was tabled in the House of Representatives that May. It proposes, among other things, the reduction in the rate of the general consumption tax (GCT) from 17.5 per cent to 15 per cent or 12.5 per cent. The proposal to reduce GCT, however, is nuanced by the suggestion that the number of items on the zero-rated or tax-exempt list would be reduced, giving companies the chance to collect GCT on more items.

On Wednesday, Wong Sam said while she was aware that it is the duty of the Government to collect taxes with consumption being the best way to do so, caution should be exercised.

"Based on my experience and research, the citizenry in Jamaica are divided into four income groups, the unskilled, the semi-skilled, the skilled and the affluent. This mix clearly shows that there is a need for special consideration in applying the GCT to all items that are now tax-exempt and zero-rated," she said.

"I think items that are so sensitive like sugar, rice, flour, oil, detergents, things like those; it's hard for the poor to come and say I need two pounds or a pound of sugar and then he has to pay GCT on the sugar, the rice and the detergent in that one basket; these are all basic food items that we use everyday. So what I am suggesting is that the government choose one or two or three as such this year to put it on, some for next year, then year three and four till you bring everything to one level," Wong Samtold the committee.

Opposition committee member Karl Samuda — who served as industry minister under the previous administration — said Wong Sam's observation was grounded in fact.

"I share the view that when we make exemptions on certain types of goods you benefit the rich because their consumption of it is twice [that of] the poorer consumers...," Samuda said.

"I don't know how far down the road you (Government) are in terms of the removal of the exemptions, but it poses a serious challenge at a time when the poor are most vulnerable. And make no mistake about it, those are challenges that are going to require the most extraordinary amount of public information, communication and abiding on the path of those who today can't even get a job," he added.

In responding, Finance Minister and committee chair Dr Peter Phillips, said "...I am not down the road in any shape or form, we went down whatever road we went down together, but obviously it is a very important issue that you raised," he declared.

"It is a very important issue ...It is very appropriate that you make this plea on behalf of those most disadvantaged in the society whose plight you understand," he added.

The Green Paper also proposes that the five per cent advance GCT now charged on the importation of goods be abolished and replaced with an advance five per cent on the cost, insurance, freight fee paid by commercial importers, except for bauxite and petroleum.

The Green Paper also proposes that the personal income tax threshold, which now stands at $441,168 per annum, be increased starting January 2012 through to 2014. An increase in the threshold for personal income tax has also been proposed. Included in the Green Paper are proposals designed to foster a system that is simple, efficient, equitable and fair to stimulate economic growth, while yielding adequate amounts of revenue.

At the end of the consultations, the feedback will result in a white paper reflecting a policy position that is expected to be promulgated and implemented this year.

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'Don't prescribe the medicine in one dose'