BY INGRID BROWN Associate editor — special assignment firstname.lastname@example.org
THE Opposition Jamaica Labour Party (JLP) says Jamaicans should expect price increases in coming months as businesses seek to recoup the additional costs they will now be forced to pay at Customs under the new tax measures announced by the Government on Tuesday.
"You are going to see price adjustments coming in the next few months as everything will have to be recouped by those who have to pay the tax and that is the fact," Opposition Leader Andrew Holness told journalists at a press conference held at the party's headquarters in Kingston on Thursday.
Holness noted that at the end of the day, the persons who are asked to pay the tax are going to find some ways to pass it on to the consumers.
"There are lot of Jamaicans who say these things don't affect us. We don't hold bonds and nobody is sending us anything from overseas that will attract such duty costs, but that is not true," he said.
A consequence of the increase tax at Customs, according to Holness, will also be greater corruption as persons find ways to evade the taxes.
"You are going to see more under-invoicing and all kinds of things happening," he declared.
Meanwhile, the Opposition spokesperson on Finance Audley Shaw described the new measures -- which Government imposed as a pre-condition to finalising a deal with the International Monetary Fund -- as a wholesale abandonment of meaningful tax reform.
Shaw said in May 2011, the JLP-led Government tabled a green paper on tax reform to broaden compliance and lower consumption taxes and custom duties.
However, he noted that the tax measures tabled by the current Administration between last year and this year neglects the work of individuals and institutions in fashioning a credible tax system that can spur growth and return Jamaica to competitiveness.
"Tax reform has, therefore, been hijacked by a reckless and misguided thirst for collecting money no matter the consequences on the economy," he said.
He predicted that the tax measure will cause further contraction in the economy, inflation leading to higher prices and instability in the exchange rate.
He said the tax on telephone calls, in particular, represents a tax on a tax.
"Last year the Government imposed a five cent and a 7.5 US cent tax on local calls and foreign incoming calls per minute. What they have now decided to do is put General Consumption Tax (GCT) on top of a tax," he explained.
In terms of the increased Custom fees, Shaw said the Government will bunch all the fees together and charge GCT on them, which is another tax on top of a tax.
The legality of this measure, he said, is being examined by the JLP's team of lawyers.
As for corporate tax and dividend tax, he said the Government has taken on a give-and-take approach.
The tax on dividend, he said, is going to affect everybody, including pensioners as pension funds are invested in the stock marketing and the dividend earned in stock market will now attract 15 per cent taxes.
This, he added, will drive investors away from Jamaican dollar investments and push them back into US investments, resulting in persistent pressure on the exchange rate.
As for the education tax, Shaw, said it will be a burden on companies and individuals.
"We have to serve notice to this Government that every red cent of that money must go to the Student Loan Bureau as promised by the minister and must not be promised then removed and put in the consolidated fund," he said.
Meanwhile, Holness said the Government does not understand economy, free market business and investments as they have put in place a tax package that "gives no hope".
A JLP-led Government, he said, would not have introduced a second debt exchange but would instead bring down tax rates and increase compliance.
"We may have to look at things such as a major tax amnesty to encourage persons to come into the tax net," Holness said.
"For those persons who are out of the tax net, to encourage them to come in, you must present credible threat that you are going to get to them...," Holness said.