The merchants of Portmore, St Catherine, have called for a cut in personal and corporate income taxes, arguing that it would reduce the primary surplus and pour $10 billion into the treasury.

Speaking through their Sunshine City Chamber of Commerce (SCCC) last week, the merchants timed their call to be on the eve of the annual budget presentation, which is probably too late, in that the finance ministry would have already crunched the numbers.

Still, it would be constructive to hear from the finance minister, and the leader of the Opposition, who has been advocating a two per cent cut in the General Consumption Tax (GCT) from the current 16.5 per cent.

The merchants want a reduction of personal income tax from 25 per cent to 20 per cent; corporate income tax for unregulated entities from 25 per cent to 20 per cent; and corporate income tax for regulated entities from 33 1/3 per cent to 30 per cent.

Chamber President Norman Walker believes the impact from the SCCC’s proposed tax cuts would benefit the working populace, medium- and small-sized entities, as well as large enterprises by:

• increasing the disposable income of employed individuals, leading to increased spending, savings, and investments and a more vibrant economy;

• increasing demand and production of goods and services, spurring employment, expansion of business capabilities, tax collection, and growth of the economy;

• easing access to capital at affordable rates, allowing retooling, expansion, educational advancement, research and development, and resulting in increased productivity;

• contributing to strong and stable macroeconomic indicators, including reduction in the primary surplus from seven per cent to 6.5 per cent, and raising an additional $10 billion in tax revenues.

This call for tax cuts should not be seen as far-fetched. Indeed, it could be argued that there is general agreement that taxes, especially Pay As You Earn (PAYE), are burdensome.

The need for cutting taxes is the conclusion of three thorough reviews of Jamaica’s tax system — The Final Report of the Tax Policy Review Committee to the Government of Jamaica (2005), commonly referred to as The Matalon Report; Tax Reform and Economic Development: The Jamaican Case (2007) by Bahl and Wallace; and A Blueprint for Taxation Reform in Jamaica (2009) by the National Planning Summit Tax Reform Committee.

Hence, the current Jamaica Labour Party Administration was emboldened to advance it ‘$1.5-million income tax break’ in 2016-2017 and an unprecedented $14 billion tax ‘giveback’ in the 2019-20 fiscal year.

Over the years, however, the big bugbear seems to have been how to overhaul Jamaica’s tax system to maximise the effectiveness of the reform process, without hurting the treasury.

We in this space have favoured a more indirect form of taxation, which makes it harder to evade or avoid and which puts the onus on people to regulate their spending. As things are, too many people get away without paying their fair share of income tax.

Governments have always been afraid to go heavily for indirect taxes on the basis that they hurt the poorest and the unemployed. But finding the right balance is critical.

Hopefully, with the macroeconomy heading in the right direction, that will come soon.