Dr Omar Davies has indicated that the Government is looking at eliminating, at least, some General Consumption Tax (GCT) exemptions and non-taxed allowances to accommodate a possible increase in the income tax threshold in April.

However, Davies, the minister of finance and planning, was extremely cautious that the changes, that would affect basic food prices, could create social and industrial unrest, especially in the tourism industry where workers would lose their non-taxed gratuities.

The Bustamante Industrial Trade union (BITU) has already publicly registered its opposition to the elimination of gratuities earned by tourism workers, the sector the minister plans to directly target to help make the threshold increase revenue neutral.

Davies had announced in April 2005 hikes in the income threshold (the highest non-taxable income limit) culminating with a 42 per cent increase as of January 1, 2007, creating a new threshold of $275,000.

However, in January, the finance ministry said the hike would not be implemented as promised because of procedural delays.

Responding to questions from the Opposition during last Tuesday’s meeting of the Standing Finance Committee of the House of Representatives, which was reviewing the supplementary estimates, Davies admitted that the Government had failed to simplify the GCT system and eliminate the allowances for fear of creating social tension.

“GCT is too complicated, too many exemptions and allowances,” he said. “The way we wish to go, we would significantly increase the take from the GCT, and even drop the overall rate by eliminating zero-rated and other exemptions which then gives you freedom of movement in terms of the threshold.

“The problem we face is, the impact of the removal of the zero-rated and exemptions on basic foods, etcetera. If you look at our GCT arrangements, it is hard to administer and hard to audit. We know the technical answers, the problem is the social engineering. How to get there.”

He said that a similar problem had been detected in dealing with the non- taxed allowances.

“A worker in the tourism sector thinks that allowances are in his favour. But they are not, because statutory deductions are based on the basic pay, and hence, whilst his take-home money is greater with the tax-free allowances, when he seeks to qualify in terms of NHT, or down the road with NIS, he has been penalised during that period.

“We know the technical solution, but it is a matter of getting from here to there without it being seen as penalising in the short term.”

Asked by Opposition Leader Bruce Golding what was the loss to the revenue of exempted goods, Davies promised to provide him with the information at a later date.

He said that another area that was being looked at was that of incentives, which was also a problem.

Davies told Opposition spokesman on finance Audley Shaw that the substantial increase in the budget listed in the supplementary estimates had nothing to do with the delay in the new threshold. He also pointed out that a task force, including government, trade unions and employers’ representatives, was currently meeting on the issue.

Davies admitted that increasing of the threshold would have cost the Government over $1 billion this quarter and about $5 billion for the entire year.

He said that the Matalon [tax review] Committee had proposed the increase in the threshold, but in return there would be an elimination of the special allowances to accommodate the hike.

He said that his view from then was that, until there was some accommodation on the issue, the threshold would be increased step by step. The threshold was increased to $169,104 per annum in July 2005 and then to $193,440 in January 2006.

“It relates to the whole labour situation within the tourism sector. One could do that yes, but you would also risk serious disturbances, internally,” Davies responded to Shaw’s suggestion that the issues should have been resolved prior to January.

Golding asked whether the Government had any long-term position on the income tax threshold and pointed out that, “with the exception of Guyana, we have one of the lowest thresholds in the region”.

Davies said that what came out of the findings of the Matalon Committee was really a significant body of technical work which he could share with the Opposition.

Parliament takes a break for cricket

Leader of the House, Dr Peter Phillips, instructed on the motion for the adjournment on Tuesday that Parliament will not sit this week due to the Cricket World Cup matches.

“It is not proposed to do any further business today, neither is it proposed to meet next Tuesday in view of the fact that it will be the first match of the 2007 Cricket World Cup,” Phillips told the Speaker at the end of last Tuesday’s sitting.

He asked that the House be adjourned until March 20, which was agreed.

In addition to the House, it is not expected that the Public Accounts Committee (PAC) will meet on Tuesday either.

This would be a major setback for the PAC, which had been unable to meet last week due to the meeting of the Standing Finance Committee to look at the supplementary estimates.

The PAC is trying to wind up its hearings on the controversial US$43 million overrun on the Sandals Whitehouse Hotel. However, unless it can meet this week, it will have only one more date before Parliament prorogues for the opening of the 2007/2008 session on March 29.

Another committee which may have problems meeting is the Privileges Committee, which is yet to reconvene on the Karl Samuda censure issue.

Smith again raises concerns about unanswered questions

Leader of Opposition Business in the House, Derrick Smith, again raised concerns about unanswered questions on Tuesday.

“There are 12 questions on the Question Paper, Mr Speaker, answers are overdue to 11 of those questions and one is due for today. May I enquire of the House Leader when will we get answers to these questions, considering that we have a very short time left before the House prorogues later this month?” Smith asked.

House Leader Dr Phillips answered, “I shall endeavour to have the answers to the questions due for answer by the next sitting of the House. This, of course, is dependent on the answers being available from the ministers of whom they have been asked.”

He said that he had been advised that answers to five questions should be ready, but he had no response in relation to the others.

Noisy debate

Tuesday’s debate on the first supplementary estimates 2006/2007 was as noisy and often hostile as expected.

This was especially so during the presentation of the Opposition spokesman on finance, Audley Shaw, who referred to a US State Department document which warned that Jamaica could become a kleptocracy, due to the lack of prosecution of corrupt officials.

Government members did not take kindly to the suggestion and heckled loudly during the rest of Shaw’s presentation.

Minister Robert Pickersgill recalled that the only politicians who have ever been sent to prison for corruption were on the other side.

“Nobody on this side has ever worn short pants, unless they choose to do so,” Pickersgill said.

Shaw recalled that while the governor of the Bank of Jamaica already has a BMW as his official car, a Landcruiser was bought for him as chairman of the Sugar Company of Jamaica (SCJ), “to visit the canefields”.

He said that since the governor was replaced as chairman of the SCJ last year, he was allowed to keep the Landcruiser, which has been paid for by the bank, plus the BMW.

Dr Omar Davies got up and responded that it was not true. However, he did not explain what had happened to the Landcruiser.

Shaw then accused minister of state in the Ministry of Housing, Transport, Water and Works, Richard Azan, of targeting JLP-held constituencies, meeting and touring with PNP caretakers, in making up plans to fix roads and bridges.

This, he said, was in contravention of a policy directive issued by the Government in October 1990, and signed by the financial secretary, which stated;

“Any work or project to be undertaken in any constituency must be brought to the prior attention of the member of parliament. Failure to do so opens the door to discrimination in employment and possible disruption triggered by community unrest. This rule is to be applied whether the member of parliament is on the Government or Opposition side.”

Shaw said that two roads in his North-East Manchester constituency had been included in Azan’s list.

He said that no contract was tendered and the PNP caretaker has been requested to submit a list of names of persons to be employed on the project.

The issue of works projects being politicised in certain constituencies has also been raised by the leader of the opposition, Bruce Golding, who has tabled questions in the House asking Prime Minister Portia Simpson Miller whether she is aware of the circular, which was signed by the financial secretary, and whether that is still the policy of the Government?

Davies explains additional $6 billion for MOU2

Finance Minister Dr Omar Davies says that the additional $6 billion in the supplementary estimates 2006/2007 for public sector salaries is the result of an increase in the percentage agreed for the first year of the two-year public sector Memorandum of Understanding (MOU2).

“Essentially, what we had put forward to the MOU2 bargaining group was for over two years, but, hoping for an 11 per cent by 9 per cent (11 per cent in the first year and 9 per cent in the second year), or 12 per cent by 8 per cent,” Davies told Parliament last week. “But the unions pushed for front loading in first year.

“So settlements were closer to 15.5 per cent in the first year. (However), the good news is that in 07/08 (second year), the adjustments will be less than we had initially anticipated.”