A day after highlighting that there were no new taxes in the 2018/19 budget, Minister of Finance Audley Shaw has announced that the Government is again contemplating rolling back tax on assets.

Last August, Shaw said that the Government was prepared to reduce asset tax for financial institutions if they committed to lowering interest rates. He emphasised that the banks must be innovative when designing loan products for the productive sector, noting that interest rates on loans for business are still too high even though there has been some reduction.

Ultimately, the finance minister wants the banks to bring interest rates to single digits. Shaw also hopes to further streamline Customs Agency of Jamaica processes, an area he says can rake in up to 40 per cent more revenues for the Government with the clamp down of illicit importations.

“As minister I have a policy of phasing things in, and then we can also phase things out. So it goes two ways. But everything has to be a process; it’s really one step at a time. For instance, we are looking at the issue of the asset taxes with a view not just to chop it off but to reduce the rate,” Shaw said.

He was speaking at the International Monetary Fund press conference on the third review of Jamaica under the Stand-By Agreement last Friday.

The IMF, while describing parts of the programme as a “turning point for Jamaica”, chastised Jamaica’s growth averaging of 0.9 per cent since the reforms began in 2013; along with structural obstacles including crime, bureaucratic processes, insufficient labour force skills, and poor access to finance.

“But it’s one step at a time. Except to say if we can plug that hole of illicits that robs the country then we can reach a point where we can actually lower the rate.

“Where we have arrived is not accidental, a considerable amount of emphasis was placed on fiscal consolidation and responsibility and at the same time we have been stressing compliance as an area that needs work. That’s what I will focus on this fiscal year, compliance among the major tax lines and the TAJ as well as customs,” the Minister continued.

He said the Government is seeking to have 100 per cent scanning of all containers coming into the country to cut down on corruption and the illegal importation of products including cigarette.

COMPLIANCE EMPHASIS

“The emphasis on the new fiscal year is not on putting on additional taxes; the emphasis is that we are going to emphasis compliance, not just for revenues but for the nation’s security.

“If we can plug that hole of illicit imports that robs the treasury, that robs the customs, then we can reach to a point where can actually lower the rate of customs duties. If everybody complies, and everybody pays then we can have low rates and that is an objective that I have,” he said.

Assessments conducted by the Bank of Jamaica on the country’s 2018/19 inflation outlook, reflected inflation remaining the medium term target of 4 to 6 per cent. Concurrently, appreciation in the exchange rate resulted in BOJ reducing policy interest rate to 3.25 per cent from 3.50 per cent.

BOJ further reduced policy rates to 2.75 per cent last February with the hope that the banks would pass on savings to customers.

Still, Governor Brian Wynter said then that while rates have been lowering in the banking system, the time it takes to see rate reduction is too long. He noted that competitive behaviour amongst the institutions must take place for consumers to benefit.

Shaw, in opening the 2018-19 Budget Debate on Thursday announced that the Government will focus on increasing competition among banks, as opposed to regulating banking fees, in a time-bound action plan to stop predatory charges and fees by financial institutions.

He reasoned that when the Government regulate one set of fees, the banks simply increase another set of fees, ultimately resulting in the Government “running behind them, trying to catch up with regulation.”

He added that the banks would simply change the name of the fee, leaving the Government to come back to Parliament with more regulation to regulate the new fee.