THE International Monetary Fund (IMF) has welcomed the $14-billion tax giveback presented by Minister of Finance Nigel Clarke on Thursday, citing that the budget measures are expected to lower the cost of doing business, reduce informality and increase economic activity.

“The staff welcomes the reductions of the distortionary financial turnover taxes; stamp duty, transfer tax, and minimum business tax, as well as a higher GCT threshold within the budget envelope,” IMF Mission Chief to Jamaica Dr Uma Ramakrishnan said during a press conference on Friday.

“These tax cuts are feasible because of the expanded tax base that has been achieved through commendable efforts in both tax policy and revenue administration,” she continued.

An IMF staff team led by Ramakrishnan visited Kingston from February 25 to March 8, 2019, to conduct discussions on the fifth review of Jamaica’s financial and economic programme supported by the IMF’s precautionary Stand-By Arrangement (SBA).

At the end of the visit, Ramakrishnan said the IMF has reached a preliminary agreement with the Jamaican authorities on a set of policies that aims to complete the fifth review under the SBA.

Passing of the fifth review will make an additional SDR 160.8 million (about US$224 million) available to Jamaica, bringing the total accessible credit to about US$1.4 billion.

Consideration by the IMF’s Executive Board is tentatively scheduled for April 2019.

In addition to welcoming the reductions of the distortionary financial turnover taxes, Ramakrishnan added that with Jamaica’s improving public debt dynamics, the staff also supports the reduction in the primary surplus target by 0.5 per cent of GDP to 6.5 per cent in the budget for fiscal year 19/20 to further boost growth and job creation.

“The additional space accommodates much-needed growth-enhancing and social spending for citizen security, PATH, and rural infrastructure,” the IMF representative said.

The IMF also praised successive governments for strong implementation of the reform programme, noting that the sustained commitment is yielding tangible dividends for the people of Jamaica.

“The team welcomes the government’s proactive steps to strengthen domestic policy institutions in preparation for exit from Fund financial support later this year. The planned fiscal council, policy framework for natural disaster risks financing, macro-fiscal capacity building at the Ministry of Finance and the Public Service, and enshrining central bank operational independence constitute key pillars,” she continued.

— Karena Bennett