KINGSTON –– The government Thursday negotiated its first major fiscal hurdle on the way to meeting pre-election commitments, announcing a two-phase increase in the personal income tax threshold from JA$592,800 to JA$1.5 million by next April.
Finance and Public Service Minister Audley Shaw, who was the target of criticisms about the proposal, informed Parliament that the move means that, as of July 1 this year, workers who earn below $1,000,271 per annum will not pay any personal income tax, and that the threshold will rise to $1.5 million on April 1, 2017.
However, to avoid leaving a $12.5 billion vacuum in the budget, due to the loss in income tax revenues, Shaw also announced a package of measures aimed at filling the gap based on the concept that, commensurate with reductions in income tax, there should be increases in consumption tax.
These measures were a $7 per litre increase in the Special Consumption Tax (SCT) on petrol for the benefit of the Consolidated Fund, expected to yield $6.4 billion; a SCT regime for Liquefied Natural Gas (LNG) and revision of the Heavy Fuel Oil (HFO) regime to yield $1.4 billion; an increase in the SCT on cigarettes, cigars, cigarillos and cheroots (including substitutes) to $14 per stick which, he said, should not push the price of cigarettes beyond $45 per stick and which will yield $574 million; and, an increase in Departure Tax to US$35 from the current rate of US$14.53, to yield $5.3 million.
But Shaw said that the move was well worth it as, instead of the 118,000 workers originally designated to benefit from the income tax relief, it is now expected that just over a quarter million Jamaicans would actually benefit.
“If you want to move from poverty to prosperity, everybody has to be on board in a more productive society, and that is what the story is all about,” he responded to jeers from the Opposition benches when he revealed the revenue measures.
“We are extremely pleased that one of the first and very important measures this new Government has now enacted is to grant tax relief to hard-working Jamaicans. We promised a threshold benefit up to $1.5 million and we have delivered on that commitment,” he told the House of Representatives, as he opened the 2016/17 Budget debate.
“We said [initially] that 118,000 people would benefit from this PAYE tax exemption measure. In fact, 251,792 persons on the PAYE roster and . . . thousands of self-employed people will now benefit from the raising of the current PAYE threshold from $592,800 to $1 million on July 1, 2016,” he stated.
He said that the same 251,792 working Jamaicans will also benefit when the threshold is raised to the targeted $1.5 million on April 1, 2017. Shaw paid tribute to the International Monetary Fund (IMF) for its input into the design of the tax plan which, he said, was “immensely important”.
“We took on board and incorporated into the tax plan everything the IMF required,” Shaw informed the House.
He said that the Jamaica Labour Party Government is quite mindful of the seven per cent primary surplus target, and is committed to it and the other structural benchmarks in the current Extended Fund Facility agreement with the IMF.
Shaw stated that under “this new, expanded and exciting tax relief from this new Government”, many more Jamaicans will be able to participate in supporting the economic growth agenda.
“The Government will act on its philosophy and belief that Jamaicans are much better at spending their hard-earned money than the Government, so Government should take as little direct income tax as possible,” the finance minister said.