The Government has indicated it is willing to review the income tax threshold to help address the dilemma faced by public sector workers who have been pushed into higher tax brackets by the new compensation system, which now features 16 core salary scales for the sector.

Making his opening 2023/24 budget presentation in the House of Representatives on Tuesday, Finance Minister Dr Nigel Clarke stressed, however, that now is not the time for an income tax adjustment.

“The transition to the new compensation system and higher levels of pay, and the absorption of non-taxable allowances into basic salary have pushed some officers into higher tax brackets,” Clarke said. “Though net income is higher by a minimum of 20 per cent over the three years, I know that for certain public officers. the higher tax bracket is an issue.”

Dr Clarke added that, “The question of the income tax threshold has arisen [but] having added $120 billion in compensation on a net basis, now is not the time for an adjustment to the income tax threshold; it just can’t be afforded at this time. However, whenever that changes you can be assured that we will be the first to do it.”

He argued that for decades critical technical and managerial posts have been understaffed because of the unattractiveness of compensation, and that the adjustments and realignment of the scales and bands will fix this issue.

“We need the best IT technicians, and computer scientists, and communication specialists, network engineers, legal draftspersons, accountants, prosecutors, economists, to deliver premium public services. We have vacancies in the Economics Unit of the Ministry of Finance which have not been filled for years; the same is true of the Attorney General’s Chambers where turnover on account of salaries has been of economic proportions. This has been a crisis, and the system is breaking because we don’t have sufficient talent for long enough periods in the areas that we need,” Dr Clarke said.

Again stressing the necessity of overhauling the compensation system, as opposed to implementing flat increases across the board which would leave long-standing inequities in the system, he argued that individuals are making salary comparisons without full information, and lacking comprehensive analysis of the anomalies in the sector.

“Pensionable public officers suffered in retirement with pensions that had little similarities to pre-retirement incomes, even after 30 years of service, because the non-pensionable allowances make up 40 to 60 per cent of income, so the maximum pension is going to be in the region of 25 to 33 per cent of your pre-retirement income,” Dr Clarke explained.

At the same time, he pointed out that the new compensation arrangement for travelling officers — a source of major discontent among public sector employees, along with the removal of the duty concession benefit — will see workers being paid for travelling that is actually done during the course of their duties.

“For decades the rules around who could be designated a travelling officer became lax, and this travelling allowance morphed into a kind of allowance that symbolised the status of the job, or were used as a supplement to pay. Along the way it has lost its purpose [as] thousands of public sector employees received travelling allowance [but] sat behind their desk 40 hours per week,” Dr Clarke stated. The new travelling compensation has been reformed to a per-miles-travelled payment system.

The finance minister told the House that under the new pay system, increases amount to more than the increases that public sector workers have been afforded over the past decade, with many workers receiving in the first year of the new arrangements more than they have over those 10 years.