$14-b tax giveback
Clarke presents massive stimulus budgetFriday, March 08, 2019
BY BALFORD HENRY
Finance Minister Dr Nigel Clarke yesterday created a stir in the country when he announced that the Government was “giving back” $14 billion to taxpayers.
Dr Clarke, in his first full budget debate since assuming the position in March last year, announced a revenue budget which went much further than the past 'no taxation' budgets from the Government.
Clarke said that the Government has decided on a stimulus path on the basis that Jamaica is now in the “best shape” it has been compared to any other period in the last 50 years.
“It is now time to give back, because it is the right thing do,” Clarke told the country in his 2019/20 opening budget speech, which lasted some two and a half hours.
He said that Jamaica would now be able to end its current borrowing relationship with the International Monetary Fund (IMF), having fully lived up to its commitments under the current Precautionary Stand-By Arrangement which ends in October.
The budgetary stimulus for the lethargic growth which has been the main point of conflict between the IMF and successive Jamaican administrations over the past five years has been winning the praises of consumers, home seekers, and the business sector, especially small and medium-sized investments, for finally providing the kind of incentives necessary to push growth beyond a two per cent maximum.
It is understood that the space for the tax reduction in this year's budget was created by an agreement with the IMF to reduce the seven per cent primary surplus target by half a point.
The revenue measures revealed in Parliament by Clarke, including the loss of revenue to Government (in brackets), are:
• increase in the General Consumption Tax (GCT) threshold to $10 million, up from $3 million ($731 million);
• replacement of ad valorem stamp duty payable on any instrument pursuant to the Stamp Duty Act, including the granting of security as collateral for loans, with a specific (flat rate) stamp duty of $5,000 per document ($6.650 billion);
• reduction in the rate of transfer tax payable on the transfer of property from five per cent to two per cent ($3.431 billion);
• increase in the transfer tax threshold applicable to the estate of deceased persons from $100,000 to $10 million ($287 million);
• abolition of the long controversial minimum business tax ($1.093 billion); and
• abolition of the asset tax payable by non-financial institutions ($1.840 million).
All measures, except the modification of the asset tax, which will become effective for the entire 2019 assessment year, will take effect on April 1, 2019. The total loss in revenues to the Government adds up to $14.032 billion.
The minister also announced new measures in keeping with the objective of expanding economic opportunity for all through the services of the Students' Loan Bureau (SLB) including:
• For new loans, application of payments will be made to the most outstanding balance first;
• Effective immediately, eligible borrowers in good standing with the SLB will be entitled to a reduction in their interest rates of two percentage points for postgraduate studies; and
• All borrowers employed full-time to registered charities, which are in good standing, will have 10 per cent of their loan balance forgiven for each full year that they are employed full-time to a registered charity, effective April 1, 2019.
Dr Clarke noted that for 2018/19 there were no revenue measures implemented, which supported the thrust to continue the reform of the tax system toward equity, efficiency, and simplicity.
He said that the revenue measures he was announcing represented further reform of the system focused on removing the most distortionary taxes in order to stimulate (i) greater competition, activity in, and access to credit markets; (ii) greater business and economic activity; and (iii) economic growth.
The measures, Clarke said, will encourage increased risk-taking business activities by micro and small entrepreneurs.
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