Business Leaders Welcome Indirect Taxation

Several business leaders have welcomed the Government’s policy shift from direct to indirect taxation.

The move is consistent with the Administration’s tax reform programme, aimed at implementing a more efficient and effective system of compliance and collection, resulting in increased revenue inflows.

It is partly underpinned by the increased income tax threshold for Pay as You Earn (PAYE) employees to $1.5 million.

This will result in nearly 400,000 persons on the PAYE roll being exempt from paying income tax, thereby providing them with more disposable income as the administration places greater focus on taxing consumption.

Immediate Past President of the Jamaica Chamber of Commerce (JCC), Warren McDonald, notes that its implementation is timely, consequent on the fact that “in excess of 40 per cent of the economy is what we term informal… and persons (in that sector) don’t pay income tax”.

“We feel it is an unfair burden on the PAYE employees and (by extension) the whole economy. We don’t think the economy can thrive and grow with only 40 or 50 per cent of working persons contributing to the economy by paying taxes,” he argues.

Mr. McDonald says in light of the fact that indirect taxation captures a wider percentage of the populace and is conducive to easier revenue collection, “we feel that this is the way to go”.

“The Chamber fully supports the move… as we feel it is the correct principle in order to ensure that everyone pays his or her fair share,” he adds.

Jamaica Employers’ Federation (JEF) President, David Wan, tells JIS News that the policy represents one of the best ways for the administration to address the long=standing issue of non-compliance with tax payments.

“There are approximately 1.3 million people (who) are registered as workers, yet only (469,131) are on the PAYE tax roll. I think it’s very unfair for the 400,000 to have been carrying the burden of direct taxation while you have 1.3 million people working. So, the move from direct to indirect taxation is a very effective way of (ensuring that) those other 900,000 persons who are employed do contribute to the Government’s funding requirement,” he contends.

While noting that it is debatable whether or not the policy is perfect, Mr. Wan, nonetheless, maintains that “it is the way to go”.

Small Business Association of Jamaica (SBAJ) President, Hugh Johnson, says the organisation’s members endorse the Government’s decision, pointing out that “we believe that indirect taxation, in principle, is more equitable”.

Mr. Johnson says there are concerns that the policy could impact some persons, particularly those deemed “dispossessed” and marginalised.

“In that regard, social programmes (should) be so structured to help to ease the burden on these persons,” he adds.

For his part, Jamaica Manufacturers’ Association (JMA) President, Metry Seaga, says the organisation believes indirect taxation can and will help to boost economic growth and, as such, “is one that we completely agree with”.

Phase one of the revised personal income tax threshold took effect on July 1, 2016, when the figure was increased from $592,800 to $1,000,272. The second phase will see the threshold moving to $1,500,096, come April 1.

The effective threshold for the 2017 year of assessment will, therefore, be $1,375,140. The full threshold of $1,500,096 becomes effective on January 1, 2018.