THE parliamentary committee on taxation has recommended that the government roll back the 15 per cent general consumption tax (GCT) on a raft of goods and services, including all books and the maintenance fees for residential strata, but voted to keep the tax on lottery winnings despite the robust lobbying of two operating companies.

However, the committee proposed that horse racing be spared the tax on winnings, essentially endorsing a decision that has already been quietly implemented by the finance minister, Dr Omar Davies, who chairs the House taxation committee.

But while the developments in the gambling sector were likely to draw immediate public attention, given the passion of the debate that has surrounded the effort to impose the tax in this area, it was the life insurance business which last night appeared to be emerging new battle ground in the effort by Davies to raise new additional revenues to finance his budget.

For life insurance companies, the GCT, it is recommended, should go on life premiums. At the same time, however, the income tax on premium income, the committee said, should be doubled to three per cent. The income tax on investment income should also double to 15 per cent, it was proposed. If the proposals go through, GCT would apply to health insurance premiums.

Senior insurance industry executives were not available for comment last night.

In-bond merchants, on the other hand, have also been proposed for a tax, softening with a suggestion that the stamp duty they pay on imports be rolled back from 15 per cent to eight per cent. Before the hike five months ago, the rate was six per cent.

The report of the nine-member committee, which largely reviewed the impact of a Davies’ budget initiative of widening the GCT net in an effort to raise $8.16 billion, was tabled in the House yesterday by Derrick Kellier, the deputy House leader.

It is expected to be debated at the next session of the House in a week’s time. But given that the ruling People’s National Party (PNP) dominated the committee with six members, it seems likely that the proposals will be easily endorsed by the House.

There was no indication in the report, however, what would be the cost to the treasury from the proposals, if any, as well as the likely impact on Davies’ effort to maintain a public sector deficit of no more than three per cent of gross domestic product (GDP).

Davies was not available for comment last night.

For the fiscal year that ended in April, the government ran a deficit of 7.7 per cent of GDP, nearly a full percentage point below what appeared the likelihood a quarter earlier but still nearly double the projected deficit.

Under pressure from international and local lenders to bring down the deficit, Davies, who had presented a $261.3 billion for the 2003/2004 fiscal year, announced a tax package of $13.84 billion.

The big ticket item in the tax package was the increased take in GCT, which would now embrace most items previously exempt or zero-rated. Another big chunk of the additional taxes was to have been approximately $3.4 billion to be earned by imposing a four per cent levy on all imports.

Private sector leaders negotiated the substitution of a two per cent Customs user charge for the import levy and faced with a howl of protests from a range of interest groups, Davies in May announced that he would give up $1 billion in GCT by removing the tax from all prescription drugs, some agricultural inputs as well as medically-related items, mostly used by the disabled.

The minister proposed to replace the GCT give-back with the tax on gaming winnings. Last year Jamaicans wagered $17.4 billion, of which 71 per cent, or $12.5 billion went to lotteries. Most of the rest went to horseracing.

But the finance minister appeared to have quietly dropped the plan to impose the tax on the race winnings, after bookmakers claimed that wagers would decline and that business would shift to illegal bookmakers.

The lottery companies, Supreme Ventures, which has the biggest chunk of the market, and the older Jamaica Lottery Company, made similar arguments, but the GCT was imposed from the start of the September. Supreme Ventures disclosed this week that its sales had declined by 38 per cent in the first nine days since the introduction of the tax.

The JLC said that sales of its instant game Pick 3 has declined nearly 10 per cent, but its flagship Lotto, with its jackpot last night at $26 million, has so far weathered the storm. The JLC’s chairman, Howard Mitchell, said the real test would be after a pay-out from the current game and the jackpot declined.

Both companies plan to make a new assault on the tax, but recommendation 10 in the report tabled yesterday propose that Davies “impose a 15 per cent tax on winnings, excluding those from the horseracing sector”.

In the face of criticism that applying the GCT on books was tantamount to taxing literacy, Davies had removed the tax on text books. Now the recommendation is that it should apply to all books. The report did not mention newspapers, which now has the 15 per cent GCT applied to the cover price.

The GCT on the payment of strata home maintenance fees had irked many people. The committee recommended that this be dropped as well as tax on services rendered by charitable organisation.

Additionally, the committee proposed the zero-rating of all drugs for respiratory conditions.

The committee’s recommendations

* Remove GCT on maintenance fees for residential strata. GCT on maintenance fees for commercial strata to remain.

* Remove GCT on veterinary services. Medicines used are already zero-rated

* zero-rate all books.

* Withdraw taxes on charitable services rendered by charitable corporations.

* Do not remove the tax on legal services in criminal cases (three members did not support the recommendation).

* Decrease the stamp duty to 8%, from 15%, for In-bond merchants.

* Roll back GCT on fishing apparatus and outboard motors up to 75hp.

* Remove GCT from goods and equipment for registered independent schools.

* Impose a 15% tax on gaming winnings, excluding those from the horse-racing sector.

* Remove GCT on life premiums. Increase income tax on premium income from 1.5% to 3% and increase income tax on investment income from 7.5% to 15%. GCT on health premiums to be applied to new policies, effective June 1, 2003, and on renewal date of existing policies

* Zero-rate all “List 4” drugs which means that almost all drugs used in the treatment of asthma are zero-rated.

* Exempt the services of private hospital and diagnostic labs from GCT.