FINANCE Minister Dr Nigel Clarke has refuted claims that the Government will collect $99 billion more in revenues, as a result of the high inflationary environment, in the next fiscal year which begins next week.

Clarke was responding to claims made by Opposition spokesman on finance, Julian Robinson during his contribution to the budget debate in Parliament.

The finance minister stated that, “The only thing that provides a windfall is real economic growth.” He stressed that, “If inflation caused a windfall then we wouldn’t have had a fiscal challenge in the 1990s and 2000s, we would just depend on the windfall.”

At the same time, he argued that the Opposition spokesman’s argument was lopsided.

“Inflation affects both revenues and expenditure. The Opposition conveniently focused on inflation’s impact on revenues and they mentioned debt service, but surprisingly ignored the fact that inflation affects government expenditures too.”

Clarke, otherwise on Wednesday, sent out a release indicating that he did not intend to embarass the Opposition. The finance minister pointed out that the calculation the Opposition used to arrive at the $99 billion was based on tax projections at the start of this fiscal year and ignored revised revenue projections in subsequent supplementary estimates.

Clarke pointed out that the original estimates was for $571 billion in taxes this year which, when measured against $670 billion in taxes projected for the upcoming fiscal year, worked out at $99 billion extra. But he said the Opposition ignored the fact that the last supplementary estimates forecast tax collections for this fiscal year would reach $606 billion, which would make the difference only $65 billion. (The figures have been rounded off.)

The Jamaica Observer contacted a local economist who explained that there is an impact on revenues, specifically on the GCT collection.

The economist highlighted that because GCT is applied to the value of the product, once the price of consumer goods increase, so too does the amount of tax which the Government collects.

“As inflation goes up, the GCT in particular will go up. Not necessarily income tax, but GCT is the one that is moving in line with inflation, and GCT is a huge component of Government’s overall tax intake. So, it’s not that the Government has increased the tax rate,” the economist explained.

Meanwhile, the finance minister noted that expenditures have also gone up, highlighting that, “The Government of Jamaica is the largest procurer of goods and services in the economy. Where there’s inflation, government expenditure goes up, and inflation outcomes exceeding budgetary outcomes doesn’t provide a windfall, as they want to suggest.”

Clarke contended that the argument being made by the Opposition spokesman is fallacious, highlighting that, “Knowing our economic history is important, and from our history we know that no government, including this Government, derives a net benefit fiscally from high inflation.

“They may be confusing what happened last year when we had a sharp growth in revenues that was mostly due to the high levels of economic growth that we experienced last year — that is the highest growth since 1988,” said Clarke.