THE government has now decided against lifting the income tax threshold and has instead instructed the minister of finance to make an Order for Remission of Income Tax for minimum wage earners.

Minister of Information Senator Burchell Whiteman said yesterday that as of January 31, when the new national minimum wage becomes applicable, employers are advised that there must be no deduction of income tax from those employees earning at the minimum wage level. The order will take effect from that date.

“The final decision is that, at this time, lifting of the threshold will not be the solution to the problem, especially given the fact that the review of the taxation system is underway and is likely to result in the streamlining in the arrangement for payment and the levying of taxes,” he told yesterday’s post cabinet press briefing.

He added that, in any event, when the threshold is lifted it has implications for “just about everybody else”.

The minister of finance has instead made an order that income tax not be collected from minimum wage earners.

“This requires that employers of minimum wage earners should not deduct the tax,” Whiteman said.

But the information minister was unable last night to say what would happen in light of the fact that the new national minimum wage would also put these workers in the bracket required to pay statutory deductions for education tax and the National Housing Trust (NHT), although he confirmed that they should make National Insurance Scheme payments.

The controversy over the taxing of minimum wage earners was triggered by the government’s decision to increase their basic pay from $2,000 per week to $2,400 per week, effective next Monday. The new rate works out at $4,368 above the current tax threshold of $120,423 per annum, which means that the new rate is taxable.

But after the Jamaica Confederation of Trade Unions (JCTU) called for an increase in the threshold, Prime Minister P J Patterson said at a function at Jamalco, Clarendon, last Wednesday that the Minister of Finance and Planning Dr Omar Davies would issue a provisional order, prior to next Monday, increasing the threshold above the new annual minimum rate of $124,800 to keep the minimum wage earners in the non-taxable bracket.

Last Friday, however, the finance mninsitry issued a statement advising that Davies had signed “The Income Tax (Remission of Tax – National Minimum Wage) Order, waiving the payment of income tax by minimum wage earners.

Whiteman said, yesterday, that the matter has been “inconclusive” and the change of heart was taken at yesterday’s cabinet meeting.