Viable source of funding needed for $1.5M tax plan

Unless the Government can come up with a viable source of funding to increase the income tax threshold to $1.5 million, as it has promised workers in both the public and private sectors, the measure will have a negative impact on the ongoing economic support programme with the International Monetary Fund (IMF), according to co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles.

However, he said the opposite would also be true. "If it has a viable source of funding, it won't. So let's just wait and see what the source of funding is, and we can determine whether it has an impact, positive or negative," he added.

Prime Minister Andrew Holness made the promise to increase the income tax threshold while on the general election campaign trail in February. Earlier this month, Minister of Finance and the Public Service Audley Shaw said that the Government also plans to provide tax relief to persons earning above $1.5 million.

Addressing an EPOC press conference at Sagicor Life Jamaica in New Kingston last week, Byles said the ability to implement the tax policy will depend on finding a source of funding for it.

ESTIMATES

"I think everybody is quite happy to be able to get tax relief," he said. "It really turns, however, on how can we fund it. So far, the estimates that I am aware of is somewhere in the region of between $8 billion or $9 billion, up to $30 billion, depending on how you implement it. All of those numbers are substantial and would require a clear source of funding for it to be viable and acceptable," he added.

However, Byles emphasised: "I think we need to give the new administration time to work through how they are going to fulfill this commitment. I don't want to prejudge it by saying it can or can't (work) or that it should be done this way or that way. It's up to them to put the proposal on the table, and when that is on the table then we can discuss whether it is the right approach or not."

He also stressed that it was incumbent on the country to finish the four-year IMF programme, "which means that we must pass this quarter's test and we must be successful in the next four tests also".

According to the EPOC co-chairman, "I think that's really important for Jamaica's credibility, internationally. That's not necessarily in contradiction to growth, though. Yes, there are things that you can do to spur growth along, even as you stay faithful to the IMF programme. I'm all in favour of that, but we need to bear in mind that fulfilling this four-year agreement is crucial for our future years and for that stamp of approval that we have enjoyed in the last three years that has brought us whatever it is we have had, including foreign investments of a fair size, and access to loans that are cheap. So we have to finish that programme, for sure."

Noting that Jamaica's problem would not be fixed at March 2017 when the four-year programme comes to an end, Byles said, "We'll still have a far way to go and we have to stick to a pretty prudent route, even after March of next year."

NEW PROGRAMME

As to whether Jamaica should enter into another programme after the current one expires, he said, "whether there is an IMF programme in place is left to the Government to determine".

However, he added, "I think that the IMF programme, in the last four years, has been decisive in putting Jamaica on the right path and keeping Jamaica on the right path. If you ask me, I would think that a programme, maybe not the same programme like what we have now, but an IMF programme in the years after March, next year, would be a good thing for the country to ensure that we stay the course."

He said, "There are many countries that have IMF programmes, and those programmes are not debilitating or particularly tough, but they do give you access to economic models and controls that are important in staying on a prudent fiscal path."

mcpherse.thompson@gleanerjm.com