In his first-ever budget presentation last Thursday, Finance Minister Dr Nigel Clarke had three main themes: economic independence, expanding opportunity for all, and protecting the vulnerable in society.

Today we will focus on just one part of his second theme — expanding opportunity for all — and review briefly the critical changes in tax policy that he has announced, changes which have already been widely welcomed by local private sector groups.

For example, the Jamaica Chamber of Commerce (JCC) congratulated the Government of Jamaica on their “pro-growth initiatives” in a press release on Friday, adding that it includes many initiatives “for which we have long advocated”, and applauded the fact that the tax reduction “would not reduce the nation’s continuing focus on its debt reduction programme and would allow for an expansion of the social safety net for the most vulnerable”.

In short, they observed “the Minister’s opening presentation augurs well for the stated objective of Growth with Equity”.

Going beyond Minister Shaw’s welcome announcement last year of “no new taxes”, this year’s budget actually “gives back” just over $14 billion in taxes, earning Minister Clarke the moniker Santa Clarke, according to another news organisation.

The net reduction is funded primarily by an IMF-approved reduction in the primary surplus target from 7 to 6.5 per cent of GDP one year ahead of schedule — worth $10.9 billion — as well as a further estimated fiscal year end projected overperformance of tax revenue of $3.7 billion beyond last year’s budget already recorded in the second supplementary estimates.

In the Fiscal Policy Paper released at the start of the budget process, the government projected a primary surplus of 7 per cent of GDP, to give a central government budget surplus of 0.7 per cent of GDP. It appears the net tax reduction “surprise” announced in the revenue measures will now reduce the projected central government budget surplus to 0.2 per cent of GDP, or effectively a balanced budget.

Looking specifically below at the first four measures with an implementation date of April 1, 2019, a number of clear priorities stand out.

The Minister is clearly trying to do all in his power to help small business (reducing their administrative costs and increasing their potential access to credit), expand home and land ownership, reduce transactions costs in the economy generally to drive greater economic activity, and, in particular, has given the biggest incentive for business formalisation in generations — a critical objective if Jamaica is to move forward.

For example, by increasing the General Consumption Tax (GCT) threshold from $3 million to $10 million the minister removes 3,500 small businesses from accounting for GCT at a potential revenue loss of only $730 million.

His move to replace all ad valorem “by value” stamp duty rates with a fixed rate of $5,000 per document will stimulate greater competition and activity in the credit market at a potential revenue loss of $6.65 billion.

Importantly, the removal includes security collateral for loans and not just property transactions. As accounting firm PricewaterhouseCoopers notes in its budget release, stamp duty currently acts as a deterrent to raising finance, refinancing existing debt, issuing share capital, undertaking business restructuring, regularising property ownership and much else.

Sale of real estate, other chargeable property, and certain securities currently attract stamp duty of up to 4 per cent, while sale of shares in private companies and the creation of share capital currently attract stamp duty of 1 per cent.

The reduction in the rate of transfer tax from 5 to 2 per cent, when combined with the reduction in stamp duty, means that the property tax portion of transaction costs will fall from 9 to 2 per cent of the property value, and will benefit particularly property buyers and developers at a potential revenue loss of $3.43 billion.

Finally, the increase in the Estate Tax threshold to $10 million from $100,000 at a potential revenue loss of $287 million will be particularly useful in regularising land titles across Jamaica.

Other measures will be implemented in the year of assessment. The abolition of the Minimum Business Tax of $60,000 per annum removes the unfairness of having to pay whether a company makes a profit or not and incentivises business formalisation at a potential revenue loss of $1.093 billion.

Finally, the Asset Tax will no longer apply to non–financial institutions (it currently ranges from $5,000 to $200,000) at a potential revenue loss of $1.84 billion.

It will, however, still be imposed on specified regulated entities at 0.25 per cent, such as banks, securities dealers and insurance companies, and the JCC, amongst others, has called for its future complete removal in their release. No doubt the fiscal space was not yet available for this measure, which many think should occur after and not before lending becomes more competitive.

It is important to note that despite these measures being described as costing $14 billion on a combined basis, some or all of the revenue is likely to be recouped from greater business activity and an overall increase in transactions driving faster economic growth, particularly in the medium term.

It is key that we also observe that there actually has been cross-party consensus for many of these measures, as they actually mirror much of the growth strategy approved across the two previous administrations over the past decade, starting with the work of Professor Donald Harris (Growth Inducement Strategy) and others long before him, particularly in the private sector.

They mostly remained mere policy aspiration, however, due to lack of fiscal space, with some pro-growth measures even being reversed in recent times to meet IMF fiscal targets.

Jamaica now seems on a very different track, poised, in the words of Minister Clarke, to achieve its long awaited “economic independence”.