THE Government has agreed to further reduce the $5,000 flat rate for property valuations below $500,000 announced last week by Minister of Finance and the Public Service Dr Nigel Clarke in the House of Representatives.

Closing the 2019/20 Budget Debate in Parliament yesterday, Dr Clarke said that the ad valorem stamp duty payable on any instrument pursuant to the Stamp Duty Act will be replaced with a flat stamp duty of $100 per document/parcel related to transactions valued below $500,000, and will be increased to the $5,000 per document already announced for documents related to transactions valued at $500,000 or more.

He also announced that the Government has agreed to reinstate the provision in the General Consumption Tax (GCT) Act, which empowers the commissioner to re-register an applicant under the voluntary registration regime, should that be the preference of the business. He said that the commissioner will retain the discretion to accept re-registration. However, all other aspects of the GCT regime will remain in force.

Dr Clarke admitted that these changes resulted from points raised by the Opposition spokesman on finance, Mark Golding, in the debate which ended in the House of Representatives, yesterday.

Golding had made the point, in responding to the announcement of the Government’s $14-billion stimulus “give back” package last week by the minister. He had proposed that given that the current ad valorem stamp duty rate on using primary property as security for a loan is 0.625 per cent, if such a title was used to get a loan of $150,000, the borrower would pay $937.50 compared to the proposed flat rate of $5,000.

Golding had also raised the point that the current GCT Act requires all persons/entities below the current threshold of $3 million to deregister and, if the threshold is raised to $10 million, it would mean that all persons/entities below $10 million would by law be required to deregister.

But the finance minister dismissed the request from Golding and Opposition Leader Dr Peter Phillips to reduce the GCT rate.

In the meantime, he noted that the country has been there before with a Debt to GDP ratio of 96 per cent, and even lower.

“The last time we had this level of Debt to GDP was in 2000/01. The Opposition leader was a senior Cabinet minister at the time. I don’t recall any suggestion then by him or anyone else in the Government to reduce the rates of GCT or SCT or to reduce any tax at all,” Clarke said.

“It is necessary to remind this House that, in fact, in 2000/01, when the Debt to GDP was last at 96 per cent, the then Government decided to raise taxes on the Jamaican people and proceeded to impose more than $26 billion of taxes over the next three years,” he stated.

He said that the reduction of GCT was considered, but analysis suggested that it would have less of an impact on the Jamaican economy than removing distortionary transaction taxes. He said that one reason was that GCT (on local and imported items combined) is Jamaica’s single largest source of tax revenue, and is projected to produce about $200 billion in revenue in the current financial year.

With a Debt to GDP level of 96 per cent, Jamaica remains among the top 25 highest indebted countries in the world and, therefore, very vulnerable to external shocks.

“In that position of vulnerability, you don’t start tax reduction with reducing your biggest source of taxes, as it is too risky to do so,” Dr Clarke pointed out.

He said that the second reason for reducing distortionary transaction taxes instead of GCT at this time, was that GCT is much more robust to an economic downturn than transaction taxes are.

“Ad valorem stamp duty on property is fickle and sensitive to overall economic health. Therefore, when you are heavily indebted, it is far less risky to reduce your fickle tax than reducing your more robust tax,” he explained.

Clarke also said that in abolishing minimum business taxation and asset tax for small businesses, raising the GCT threshold, and reducing financial transaction taxes, the impact of applying some of the space to a GCT reduction would be negligible in the context of the approximately$200 billion intake from GCT.

He said, too, that almost half of the country’s intake from GCT comes through the imposition of the tax on imported items, and reducing the rate would be passing the tax cut stimulus to other economies.