Licence fees hiked
FINANCE Minister Omar Davies yesterday announced sharp increases in motor vehicle and other licences, but the $205 million that he expects to raise from the taxes and higher fines represents a mere 1.5 per cent of the additional $13.46 billion he will have to find to close the budget for this fiscal year.
In fact, Davies indicated that he will have to borrow more than initially projected during this fiscal year — a requirement that will see the public debt, which at the end of September stood at $538 billion, grow to $569, or 141 per cent of the country’s total output of goods and services, by the end of March.
Between last October and March, when the fiscal year ends, the debt will have risen by $36.7 billion. The biggest chunk, $21.2 billion, will be borrowed on the local market.
“The increase in the debt mainly reflected higher budgetary financing requirements and programmed disbursements,” Davies told Parliament yesterday.
The tax hikes, which will see motor vehicle licences spiral between a third and 37.5 per cent, will take effect in January. They were announced a mere two months after the People’s National Party (PNP) was returned to a historic fourth consecutive term in government.
People who own vehicles with engines of under 2000 ccs will now pay a licence fee of $2,750, an increase of $750 while those with engines of between 2000 ccs and under 3000 ccs, will pay an additional $1000, to $4000.
Davies expects to raise $86 million from this measure, plus another $29 million from doubling the cost of motor vehicle examination to $1,500.
The finance minister last week tabled supplementary estimates that will push the 2002/2003 budget to $223.5 billion, an increase of 6.4 per cent on the approximately $210.1 billion that Parliament approved in April.
When he returned to the House yesterday to debate the budgetary changes, Davies brought the tax package that will also see increases in fees for gun licences, for the registration of clubs, bars and other places where spirits are sold, travel agencies and petrol stations.
Traffic fines and fines for breaches of the Customs Act will also be increased, which, together, Davies expects to draw an additional $50 million to the government’s coffers.
But these, plus the expected higher taxes from motor vehicles ($115 million), gun licences ($12 million), traffic fines ($16 million) and other licences and fees ($12 million) will be minuscule compared to what the administration will need to meet its increased spending.
Of the additional $13.46 billion that the government plans to spend in the fiscal year, which ends in March, the biggest chunk of $8.22 billion, or 61 per cent, will be for salaries. The increase will move the wage bill from $16.8 billion or about eight per cent of the budget, to $25 billion and just over 11 per cent of the proposed new expenditure.
In a statement to the House, Davies said that the extra money was to meet retroactive wage payments to public sector workers for contracts for the 2000/2001 and 2001/2002 financial years.
“The protracted nature of wage negotiations resulted in a build-up of arrears,” Davies said.
The additional sums also includes $491 million for the payment of the initial tranches under an agreement to bring the salaries of the central civil service to 80 per cent of what prevails in the private sector by 2006. Another $294 million will meet increased salaries for the political directorate, including parliamentarians, parish councils and mayors.
The next biggest chunk of the increased budgetary allocation, $3.8 billion, will be for interest payments, pushing interest costs to $63.4 billion or 23.36 per cent of the new budget.
Overall, however, the cost of servicing the country’s debt has moved to $105.82 billion or 47.3 per cent of the budget, against 48.5 per cent in the early budget when debt payment consumed a little over $102 billion.
Davies said that the higher interest costs was because of “significant increases in rates since September” as well as unbudgeted interest payments on behalf of public sector entities such as the National Water Commission, Carib Engineering Corporation and the Sugar Company of Jamaica. He also had to pay interest on securities issued on behalf of the University of the West Indies for obligations due to the university and its teaching hospital and for additional debts they raised because of shortfalls in budgeted revenues.
Davies also noted a $1.1-billion increase in grants to the local government authorities, on top of the $400 million they were allocated in the previous budget, and said that this was because of a fall from property taxes.
The government had early this year moved to revalue property so as to substantially increase rates for the money to be used to finance local services, including paying for street lights and garbage collection.
But the government had to slow down on the programme and make concessions in the face of a public revolt in the period heading into general elections.
Davies said yesterday that $380 million of the allocation to the local governments will be for street lights and $720 million for solid waste management. “These provisions are as a result of a shortfall in property tax collections which would normally cover the costs of these services,” the minister said.
Additionally, $350 million have been earmarked for the holding of local government elections, scheduled for March next year.