JHTA head warns widespread take-home pay not guaranteed with tip tax removal

Robin Russell, president of the Jamaica Hotel and Tourist Association (JHTA), says the Government’s plan to remove taxes on tips for hospitality workers does not guarantee any notable widespread increase in salaries, as only about half of tourism workers are likely to benefit.

According to Russell, at least 50 per cent of tourism workers already do not pay taxes on tips.

“I don’t want to be overly optimistic that because of this, now everybody is going to get significant increase in pay…because a lot of persons falling into [the] $1.7-million range would not be taxed for tips already,” he said.

In April of this year, the Government increased the personal income tax threshold from $1.5 million to $1.7 million.

Prime Minister Andrew Holness, in his policy pivot address last month, indicated the Government’s plan to reward excellence in hospitality and service sectors by removing taxes on tips, and require that 100 per cent of gratuity be paid to workers in the hospitality sector.

The plans to remove taxes on tips and require full payment of gratuity to workers was reiterated last weekend by Tourism Minister Edmund Bartlett.

Gratuity is applied as a percentage of the service charge and is paid directly to workers, while tips are voluntary payments made by visitors and are typically pooled and distributed among employees.

“I would think that tourism workers are earning just about right there ($1.7 million), or a little bit less ... they are already not paying tax,” Russell stressed.

REMAINS CAUTIOUS

Although he stated that he is in agreement with the Government’s decision, he remains cautious.

“I don’t want to create the impression that this will definitely work out,” he said. “When it’s officially announced, it could send another shock wave through the industry, and we might not see the expected benefits.”

There has been a wave of industrial action by tourism workers recently, forcing Bartlett to intervene as workers protested their working conditions and low salaries.

However, sharing the Government’s plan to restructure the tourism labour market to ensure a more professional and equitable system, Bartlett said gratuities, charged as service fees on rooms, dining, and other services, should exclusively be paid to employees.

“The gratuity, which has been instituted as a service charge exclusively for the workers, we insist, must be paid to the workers, and if this was so, the salary levels within the industry, certainly the take-home pay of the worker, would easily be twice what it is,” Bartlett argued.

“We are insisting that the gratuities be paid to the workers, and that we will remove the tips from the taxable income areas, so that all tips to the tourism workers will be tax- free.”

Russell explained that, historically, tips and gratuity were not included in a worker’s official salary and, as a result, were not subject to taxation. Because of this, many tourism workers struggled to secure loans, as banks only considered their base salary, disregarding the additional income from tips and gratuity.

He stated that the decision was taken to include tips and gratuity into their salaries, which resulted in them being taxed. But he noted that the disadvantage of this was that some workers were taking home less money.

He also stated that when the $1.5-million personal income tax threshold was introduced in 2017, all income earned by tourism workers was considered, calculated, and became taxable if it exceeded the threshold.

“My biggest fear is that persons are just going to feel that because the Government has announced this, that they are going to have to see an increase in their salaries,” he said. “This will impact some workers, maybe not the very lowest line worker, but there are workers that will benefit from this.”

sashana.small@gleanerjm.com