MINISTER of Finance and Planning Dr Peter Phillips says that the passage of the Bill making provision for the harmonising of charitable organisations for taxation purposes will remove one layer of the bureaucracy in his ministry.
"It takes one layer of the bureaucracy out of the system, totally, which is the minister who is at the centre (minister of finance), and empowers the Customs and the TAJ (Tax Administration Jamaica). Once it is determined that it is a charitable purpose as defined under the Act, then the waiver of the applicable duties and all of that becomes at the discretion customs, " he told the House of Representatives on Tuesday.
But Phillips shed no tears giving up the discretionary authority to grant waivers to charities, a structural adjustment required under the terms of the new Extended Fund Facility agreement with the International Monetary Fund (MF). Instead, he suggested relief.
"What we want to do is to cut down on the bureaucratic red tape that we have built up, where every single thing has to come to the minister's desk. I spend more time signing documents, which the law says can't move until I sign it. If I am out of office, it can't move. We can't work with a system like that, we have to go forward and we're doing that with the charities first of all," he said as he closed the debate on the Harmonisation Bill.
Under the memorandum of agreement between the Government and the IMF signed May 1, it is required that Jamaica pass the bill by May 30. However, that is not the end of the process as a comprehensive Charities Act must be implemented by November 30. Phillips told the House that it would be tabled by September 20.
"The tax treatment is being separately treated at this time, because of the deliberations with the IMF, and because of concerns shared by the government of Jamaica and the multilateral organisations that the current regime (in terms of ) the treatment of charitable organisations allows for the possibility of significant revenue losses by way of taxes," he explained.
The changes means that Jamaican charities at home, that receive gifts or donations from the Diaspora or other charitable bodies, will no longer need to write the Ministry of Finance and Planning requesting a tax or customs duty waiver for the gifts. The Bill will also amend a number of other laws, including the Customs Act, General Consumption Act, the Income Tax Act, Stamp Duty Act and Transfer Tax Act.
Dr Phillips said it is being promulgated in the context of "an ever-expanding list of charitable purposes and an abundance of waiver facilities, which obtain due to the inconsistencies in the provision relating to charities and charitable purposes across all tax types".
In order to be considered a charitable organisation in the future, entities must perform certain functions for the public benefit. These functions include the prevention or relief of poverty, the advancement of education, the advancement of religion, the advancement of health or saving of lives and the advancement of environmental protection or animal welfare.
The Government has admitted that charities are a major source of tax expenditure, benefiting from both exemption and waivers but, at the same time, it admits that it could not fill the vacuum which would be left, if the donations to Jamaica's poor and indigent from charities dry up because of high duties and taxes.