Clarke says stimulus ‘easily’ sustainable
Published:Saturday | March 9, 2019 | 12:00 AMLivern Barrett/Senior Staff Reporter
Finance Minister Dr Nigel Clarke has said that the $14-billion stimulus package that forms the core of the Government’s 2019-2020 Budget is “easily” sustainable.
Further, Clarke pushed back at suggestions that not everyone in the society would benefit from the raft of tax-relief measures he announced on Thursday, which are aimed at boosting economic activity by promoting entrepreneurship and removing fiscal impediments to business.
“The economic benefit that is likely to be generated [by the stimulus package] will be a benefit to everyone. So this represents a Budget in which everyone has something, in which there is a benefit for all,” he said, during a post-Budget press conference at his central Kingston ministry.
Seeking to support his assertion that the stimulus package was sustainable, Clarke pointed out that in the two decades before the 2016-2017 fiscal year, revenue collections performed below target every year, except one.
Conversely, he said that revenues have overperformed by an average of approximately 0.8 per cent of gross domestic product (GDP) in the past three years. “This tax cut occurs in that context,” the finance minister said.
“It’s not six months of overperformance. It’s not one year of overperformance. It has been overperformance over three consecutive years. This is showing us that it is easily sustainable over time,” he insisted.
MASSIVE INCREASE
Clarke said it would be “foolhardy” to try to estimate the expected increase in transaction activities that would flow from the stimulus package but said that there is no question that it would be “massive”.
“So I know that not just this year, but the year after, and the year after, that we are going to have a massive increase in transaction taxes,” he predicted.
“Everywhere else in the world that you have reductions in transaction taxes, you’ll see a massive increase in activities,” Clarke insisted.
Asked why the Government did not reduce the rate of general consumption tax or the tax on fuel to benefit a wider cross section of the population, Clarke said that at 96 per cent of GDP, Jamaica was not yet “out of the woods”.
“We are still very vulnerable, and so we have to be very strategic in the range of taxes that we choose to reduce. It’s about going after the distortionary taxes first – taxes that distort business activity, investment activity, and economic activity,” Clarke reasoned.
The finance minister acknowledged that it was difficult to strike the right balance between fiscal discipline and what is widely considered an election budget but insisted that he is “absolutely committed” to holding the line on prudence.