Has the JLP abandoned the plan to move from direct to indirect taxes?
Taxes are generally abhorred, but law-abiding citizens pay it, even if reluctantly, knowing that they are necessary to fund amenities like schools, hospitals, roads, water and sewerage installations, garbage collection, and for salaries to a wider bunch of public sector employees.
Like in many other countries, Jamaican governments have struggled over the years to come up with a taxation system that would find greater favour with the populace, while extracting sufficient funds to keep the country and Administration going.
Finding the perfect solution has eluded tax experts and policymakers, resulting often in promises by Opposition political parties, some of which are abandoned as soon as they assume power, often because they take real work.
Ahead of the 2016 General Election, the Jamaica Labour Party (JLP) Opposition promised to move Jamaica from direct to indirect taxes, meaning to end personal income tax and seek to raise funds from things like General Consumption Tax (GCT) and Special Consumption Tax (SCT).
Our memory of this solemn promise has been jolted by an article in our Sunday edition, in which chairman of the Economic Programme Oversight Committee (EPOC) Mr Keith Duncan appeared to support a call for the personal income tax threshold to be increased to $2.2 million, with conditions attached.
Opposition People’s National Party President Mr Mark Golding upped the ante by asking that the threshold be increased to $3 million.
The Caribbean Policy Research Institute argued in May this year that the segment of population who had been released from the tax burden seven years ago, in keeping with a pre-election promise, had now been brought back to square one by inflation. The think tank also suggested that adjustments to Pay As You Earn (PAYE) should be indexed to inflation.
Against the background of tax collection growing by 17.4 per cent so far this year, the EPOC chairman said if the tax revenues continued to grow and economic activity improved, then there may be room for the threshold to increase.
Such a move could directly benefit middle-income and lower-middle income earners, as was done for the more vulnerable with the reduction in bus fares, Mr Duncan suggested.
To us, all of this appears to be a continuation of that struggle to find that elusive best tax template. This might be the perfect time — as it prepares to face the electorate — for the Government to explain why it has not moved decisively to try indirect taxation.
It is not unreasonable to conclude that Jamaicans on the PAYE system are especially aggressively abused, because they have no choice as their money is taken at source.
As far back as 2004, a research paper on tax reform in Jamaica by the Atlanta-based Andrew Young School of Policy Studies, Georgia State University, estimated that as many as 75 per cent, or more, of self-employed Jamaicans may be outside the tax net.
It takes serious work, but let’s try the very direct GCT/SCT method that enhances higher tax collection while promoting greater fairness.