In order to achieve a more investor-friendly business environment and faster economic growth in the country, the Jamaica Chamber of Commerce (JCC) is calling for a modernised, simpler tax system.

“We believe the time is right to revise the current tax framework to one that fosters simplicity, encourages investment and is modernised to allow for a more equitable distribution of the tax burden across all groups,” JCC stated in a press release.

In its statement, JCC outlined three reforms which it believes should be undertaken by Government.

The first proposal is the removal of the five per cent surtax on personal income in excess of $6 million, which would restore the personal income tax system to its previous pre-2016 flat rate structure.

“It seems that the five per cent additional tax was only introduced in 2016 to help fund the increase in the income tax threshold to $1.5 million. Given current strong tax receipts, this should be treated as a temporary measure, as it was under the Golding Administration, and be removed in the 2020 budget,” the chamber stated.

“Currently, many consider this a nuisance tax as it is not material for the Government’s overall tax receipts, probably due to income shifting between businesses and personal income. Moreover, it violates a long-standing equitable principle of the 1980’s reform that individuals and companies should pay the same, which was also put in place to minimise the income shifting problem.”

Citing St Lucia’s tax policies, JCC also proposed the removal of tax on dividends to create a single layer of taxation and avoid the double taxation of dividends.

“Multiple rates of withholding tax create significant distortions and unduly influences corporate behaviour. This measure will be a relatively low cost as most large corporate groups are already using Caricom holding company structures. Abolition of the dividend withholding tax will reduce the incentive to use tax havens or other lower tax rate jurisdictions for holding companies and therefore facilitate businesses using Jamaica as the key hub to support their regional expansion, with associated head office employment, as well as further encouraging the development of Jamaica’s stock exchange and capital markets in line with government policy.”

The JCC also recommends that the Government announces a phased reduction in taxes in the different sectors and industries over time to achieve a more uniformed tax structure, gradually removing these higher tax rates and moving to a neutral tax system for the key tax types.

“The current system has multiple corporate and other tax rates with some that differ by sector or industry. Examples include the higher corporate tax rate on regulated entities, the asset tax which is still imposed on the financial sector after being introduced in 2012 as a temporary measure to assist in the fiscal consolidation efforts, and the telecommunications sector which has two rates of general consumption tax (GCT) — 16.5 per cent and 25 per cent, with the higher GCT rate primarily a cost that is passed on to the more financially vulnerable segment of their consumers,” JCC stated.

JCC indicated that it will be pleased to engage in what is considered as an Economic Programme Oversight Committee-style process of consultation to achieve the proper sequencing of these structural tax reforms for the benefit of all Jamaicans.