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Minister of Finance and Planning, Dr. Omar Davies has said that the growth of the country’s economy remains positive for 2007 despite a number of fiscal challenges experienced in 2006.
“When you take into consideration the challenge of high oil prices and the challenge of settling with the unions, I think 2006 was a good year and I also think that 2007 will be better,” the Minister pointed out.
“For 2007, we expect a lower interest rate environment and we also expect that the investment in tourism, mining and construction will continue,” Dr. Davies said.
The Finance Minister who was addressing Mayberry Investment’s monthly investment forum on January 24 at the Knutsford Court Hotel, explained that the challenges last year, were due in part to higher than expected costs associated with the MoU2, post-hurricane reconstruction costs, Government being unable to divest its 20 per cent shares in the Jamaica Public Service Company, and low inflation.
“[MoU2] cost us a little more than we had anticipated. It cost us around $4 billion which is about .6 per cent of GDP. We had assumed we would have done something in the range of [12 per cent in the first year, eight per cent in the second year] but, by and large, we did – 15 per cent in the first year and five per cent in the second year,” he explained.
He also noted that the rehabilitation of roads, some of which were damaged in 2005, continued to cost much more than had anticipated “and so we have had to spend more on road reconstruction than we had planned,” he reiterated.
Dr. Davies also noted that the Government’s plan to secure additional revenue by divesting its 20 per cent shares in the Jamaica Public Service Company did not materialize because of Mirant’s decision to divest its 80 per cent stake in the company.
The additional revenue, he revealed, would have been in the region of some $3.5 billion.
These challenges, the Minister said, were partially offset by significant recovery in the construction sector during the latter part of the year and increased payroll taxes from higher wage payments.
The Finance Minister further said that as the government looked to maintain economic stability and increase growth for 2007/2008, more focus would be placed on increasing tax compliance.
“You will see a much more aggressive collection by the tax authorities [and] you will see much stronger adherence in terms of compliance efforts,” he informed.
“We will be utilizing information technology to cross reference and ensure that as high a percentage as possible which is due and payable is received,” he said, adding that the Government was receiving external assistance from the International Monetary Fund (IMF) in this regard.
Other initiatives that would be implemented include legislative amendments, third party collections for greater ease and access for payment of taxes as well as improvement of technological solutions to include e-filing and expansion of e-payment as well as to allow for online taxpayer account enquiry.
The government will also be embarking on further rationalization of organizational processes and structures to improve effectiveness and efficiency.