‘Straight giveaway’

The reduction in the electricity tax announced by Prime Minister Andrew Holness on Sunday is not expected to benefit the majority of residential users but will create an “equity issue”, energy consultant Stephen Wedderburn has asserted.

At the same time, veteran trade unionist Helene Davis-Whyte said the prime minister’s announcement of a $20,000 giveback to Jamaicans who are not captured in any system, falling outside of safety net programmes, creates the context for a “run-with-it” Budget for the next financial year.

Holness, the leader of the ruling Jamaica Labour Party (JLP), while speaking at its 81st annual conference at the National Arena on Sunday, said for the next Budget, a reduction in the general consumption tax (GCT) on electricity from 15 per cent to seven per cent and the removal of the non-tax threshold should be expected.

This is to be replaced with an incentive-compatible rebate of GCT for persons who use 200 kilowatts or less per month.

Wedderburn, a former LNG project coordinator in the Ministry of Energy, said the announcement might have come across as a big benefit to everyone but cautioned that this would not be the case because approximately 70 per cent of Jamaica Public Service customers, mostly residential, do not cross the threshold of usage for the application of GCT.

“It is only a small number of residential consumers who will see any benefit. Essentially, the threshold is about the same as the average use of electricity. So, anybody is at the average or below, that is any householder who is not now paying GCT on electricity, this move doesn’t mean anything [for] them,” Wedderburn told The Gleaner yesterday.

He said the majority of persons who have a household electricity bill will not see any change from this decision.

Wedderburn said, instead, an equity issue arises because the people who will benefit are the people who use a lot of electricity, who tend to be wealthier individuals or households.

“So that’s a concern. You’re giving a benefit that the more affluent people in Jamaica will benefit from,” he said.

However, he noted that small to large-sized businesses stand to see some benefit from a cash-flow perspective.

“They are able to get back the GCT they pay eventually but it does have a cash-flow benefit if they don’t have to pay it right away. So, I suspect that both small and large businesses will find some benefit, maybe a cash-flow one,” Wedderburn explained.

Further, Holness said there are Jamaicans who have not been fully captured in the Government’s We Care giveback programme who should also benefit from the cashback being enjoyed by others through the reverse income tax credit initiative, now under way.

That programme currently benefits Jamaicans earning $3 million or less in annual income.

Holness said those being targeted now are persons not registered on PATH, not captured in the tax system through employment, or not currently on Jamaica’s national social pension or NIS system.

“These persons would be outside our safety net programmes, 18 years or older, unassisted and unregistered vulnerable population. As citizens, they too should benefit from the giveback. Starting in February, we will open applications which will involve a needs assessment process for a one-off cash grant of $20,000,” he said.

Davis-Whyte, a former head of the Jamaica Confederation of Trade Unions, said this initiative “is a straight giveaway” because it is not based on the payment of income tax.

She said Holness will have to make it clear in the Budget how this will be funded, given that a lot of what has been announced is for the next cycle.

“To use a term that has been used in the past, I would call it a ‘run-with-it Budget’. Certainly, there is an attempt to be able to speak to persons who are reeling under the ever-increasing cost of living and elements of spending package that would have led to them feeling the brunt of the high cost of living. There is an attempt to deal with that certainly electricity cost being a part of a lot of person’s budget month by month.

“The truth is based on what is announced, there is clearly an attempt to deal with those persons who have become very disenchanted and a lot seem to be even just meant for party supporters themselves who clearly have become disenchanted and were voicing their opinions in terms of whether or not the Government’s macroeconomic stability and the gains based on that, whether in fact that is coming to the, quote-unquote, ordinary Jamaicans. I think that is the attempt that was made in the speech that the prime minister delivered,” Davis-Whyte told The Gleaner.

kimone.francis@gleanerjm.com