EFFECTIVE January 1, 2016, the threshold on Personal Income Tax will be increased from $557,232 to $592,800 per annum.

“For all PAYE persons, this will mean an additional $35,568 per year of tax free income, but the impact in terms of lower effective tax rates will be greater for the lower income PAYE tax payers,” Minister of Finance and Planning Peter Phillips said.

Opening the 2015/16 Budget Debate in the House of Representatives last Thursday, the minister said the proposed increase in the threshold would relieve another 9,000 households from income tax and bring the total number free of tax to 129,000. The revenue loss from this adjustment is $644 million.

There will also be a removal of duties on racehorse breeding stock in order to facilitate the continued viability of the racehorse industry. The category of horses which presently attracts a tariff of 40 per cent will be subject to a lower tariff of five per cent.

“This will result in a minimal revenue loss for the fiscal year of $1 million and will help stabilise conditions in the sector and support the divestment exercise. The effective date for this measure is April 1, 2015,” Dr Phillips said.

Meanwhile, the Government has proposed new revenue measures which are expected to raise some $10.4 billion needed to fully finance the 2015/16 budget.

The minister explained that when the budgeted expenditures for the 2015/16 are compared to projections for total revenues, there is a revenue gap of $22.7 billion, if the Government is to attain the 7.5 per cent primary surplus target.

The minister pointed out that of the $22.7 billion in revenue gap, it is expected that tax compliance efforts are to provide some $12.3 billion this financial year, leaving a gap of $10.4 billion.

Dr Phillips told the House that the revenue measures are being proposed bearing in mind the country’s revenue needs and its commitment to protect the most vulnerable.

There is a proposed increase in the Special Consumption Tax (SCT) on cigarettes. The finance minister said the Government is proposing that the SCT be increased from $10.50 per stick to $12 per stick, effective March 13, 2015.

“We expect that these new rates will yield an additional $488 million in revenue. These receipts will be directed to the National Health Fund,” Phillips said.

An adjustment of the asset tax of the insurance sector is also being proposed. Dr Phillips explained that after consultations with the Life Insurance sector, the 1.0 per cent asset tax rate be reduced to 0.25 per cent; the gross premium tax and the net investment income tax be removed; and a corporate income tax (on total income) be levied at the standard rate of 25 per cent.

“These changes will be applicable to the year of assessment, 2015. This revised tax measure is one that we believe allows the sector to be more flexible with respect to its business development and business model; facilitate greater growth in the sector and over time a greater increase in revenues. For this year, however, the measure is calculated to be revenue neutral,” he noted.

The Government is expected to earn some $962 million in revenue from an environmental levy which is to come into effect, April 1, 2015.

Dr Phillips explained that the levy will be placed on domestic production to mirror that on imports.

It is being proposed that a 0.5 per cent environmental levy be applied to all qualifying domestic supplies of goods as exist currently, but now including Caricom imports and domestic supply of goods, excluding the services sector, charitable organisations, exempt organisations, international organisations and mining.

The Government is also proposing to raise some $6.4 billion in tax revenues with a proposed increase in the SCT rate of $7 per litre on petrol, effective March 18, 2015.

There is also a proposal that the current one per cent petroleum cess paid by Petrojam to the Petroleum Corporation of Jamaica be replaced by a specific SCT of $2 per litre on specified petroleum products.

“The base of the proposed $2 SCT would be all petroleum products with the exception of crude oil, jet fuel, Bunker C fuel, and fuel used by the Jamaica Public Service Company for energy generation, the independent power providers as regulated by the Office of Utilities Regulation and the bauxite industry,” Dr Phillips said.

This measure, to be effective March 18, 2015, is projected to yield gross revenues of approximately $1.8 billion.

In addition, there is also to be the re-introduction of General Consumption Tax at the standard rate on monthly residential electricity consumption above 350 kilowatt hours. This is estimated to yield revenue of $807 million and is effective April 1, 2015.

Other proposed tax measures include rationalisation of outdated selected user fees, fines and penalties in respect of excises.

This measure is expected to earn revenue of $500 million, with the date for the revised fee structure being April 1, 2015.

In terms of the bauxite levy, Dr Phillips told the House that there have been positives in the international environment, among them the increase in the price of bauxite and alumina.

“While we understand the reasons in the past, which both administrations have had to engage in to discount or relieve production companies of the requirements under the Bauxite Levy Act, the interim regime in respect of the bauxite levy which was negotiated in 2008/9 came to an end last December. The full levy is now due and we expect all the companies to adhere to the law, both in letter and spirit,” the minister said.

— JIS