THE Golding Administration continued to take a pounding at the weekend for the new tax measures it announced last week with the Jamaica Exporters’ Association (JEA) describing them as “regressive” and Jamaicans for Sustainable Development saying they represented needless sacrifices being made by the country.

“The tax programme proposed is regressive, is unevenly distributed, will increase poverty and will significantly damage the export sector,” the JEA said in a news release.

“The approach was bereft of consultation, is inequitable and deals solely with the fiscal deficit, without presenting an overall plan as to how we will grow the economy in the medium to long term,” the JEA added. “The fundamental issue of the debt burden has also not been addressed.”

Since last Thursday when Finance Minister Audley Shaw announced the tax package designed to raise $21.8 billion to plug a hole in the budget, the Government has been taking a lot of flak for the fact that the measures, which will become effective January 1, will impact heavily on the poor.

The tax package, to which the Government had to commit in order to qualify for a US$1.2-billion loan from the International Monetary Fund (IMF), includes an increase in General Consumption Tax (GCT) from 16.5 per cent to 17.5 per cent and the inclusion of several food items and services that were previously not taxed on the GCT base.

In addition, residential customers will pay GCT on electricity usage exceeding 200 kilowatt hours per month, while the Special Consumption Tax on fuel will be increased by 15 per cent, a move that will affect motorists.

Consumers will also pay GCT on fresh fruit and vegetables, ground provision, legumes, onions and garlic, as well as on meat and poultry.

In addition, fish, cornmeal, corned beef, pickled mackerel, herring, shad and dried salt fish, canned sardines, canned mackerel, bread, buns, bullas, biscuits and crackers, sugar, salt, eggs, patties, rolled oats and baking flour will now attract GCT.

Other essential items such as cooking oil, syrup, fish, cock and noodle soups, corn, disposable diapers for the incontinent, sanitary towels and tampons and even children’s picture books and painting books will also attract GCT.

The JEA knocked the Government for failing to “present measures to increase production or to incentivise exports, although it is generally accepted that the country’s problems require commitment to and urgent execution of an effective export-led growth strategy”.

The association proposed that the approach be “re-examined to reduce the disincentives to export-led growth that will result from the imposition of the new taxes, with our greatest concern being those on fuel, agricultural and other production inputs and electricity, which will make Jamaica’s exports uncompetitive”.

The JEA also suggested that the Government should have sought to introduce any new revenue measures within the context of overall tax reform, implement measures for effective collection of existing taxes and seek to widen the tax net to ensure that there is greater compliance.

“We also believe that consideration should have been given to the possibility of one-off taxation to generate more easily collectable revenue and that consideration should also have been given to increasing the withholding tax on the interest earned from Government papers,” the JEA said.

“Finally, the Government should also seek to incentivise exporters in the form of tax relief on earnings from exported goods and services to drive export-led growth.”

Jamaicans for Sustainable Development, in their response, reminded that from April through June this year they had asked the Government to recast the budget and the country’s basic economic strategy as the budget had become unsustainable shortly after it was presented and had not helped to overcome the economic crisis.

“The Government had imposed taxes on gasoline and increased the rate of GCT to 16.5 per cent to close the gap in the budget, which has not worked,” the group said.

The best possible route to take, they said, was:

1) increase the withholding tax on government bonds from 25 per cent to 33 1/3 per cent which will yield the necessary J$10 billion;

2) for a special tax on bank super profits this year, which have been the highest in banking history in Jamaica, according to financial consultant Anne Shirley;

3) increase taxes on luxury items and target collections from known tax evaders;

4) conclude the agreement to divest Air Jamaica to the Jamaica Airline Pilots Association which will be less costly to the Government than any other proposal made; and

5) finalise the buying back of current high-cost debt, noting though that US$500 million will retire some J$45 billion from a debt package of J$1.3 trillion.

“These strategies will attain the required fiscal targets and make the imposition of new taxes and more hardship for the people again unnecessary, which would in any case be morally corrupt and fraught with economic, political and social instability,” the group said.

“In any event, to increase taxes and unemployment and reduce expenditure in our economy now would cause the economy to contract even more and stagnate as the results of the wrong decisions in recent months show,” the group added.

It said that the country needs to successfully close the IMF negotiations and move on to restructure the economy, building upon the two relative successes in the crisis to date — tourism & agriculture — which were possible because of the incentives and stimulus packages used in these two sectors.

“The concerns of possible capital flight, which have been predicted from some of these measures, and the prime minister’s apparent fear of the market must be taken into consideration, so must the possible consequences of destroying our country by trying to please certain special interests with the wrong strategies,” the group said.

“The people of Jamaica have been making sacrifices like this for the past 32 years and more, to no avail,” the group argued, adding that “it is time for the people to stop making needless sacrifices, it is time for solutions to these problems”.