The Government will this year advance its programme to modernise public financial management, by overhauling expenditure control systems and reforming and strengthening tax administration.
Finance and Planning Minister, Dr. the Hon. Peter Phillips, gave this undertaking on Thursday, April 18, as he opened the 2013/14 Budget Debate in the House of Representatives, under the theme: ‘Restoring Hope – Expanding Opportunity’.
He emphasised that the guiding principles underlying the Government’s tax reform efforts include: meeting the revenue demands of the budget; ensuring greater equity and simplicity; and increasing compliance.
The reform process will be done by strengthening policy, legislation, and institutions.
Policy reform measures are intended to: widen the tax base for both corporate income tax and consumption taxes; reduce distortions in the system, especially in regard to tax incentives and waivers; introduce legislative and administrative instruments to increase compliance; and lower rates, including personal income tax to a competitive level, depending on improvements in the revenue.
“Over the next four years, Jamaica will institute the most comprehensive legislative reform of its tax system in several decades,” Dr. Phillips pointed out.
Specifically, in this fiscal period, the programme will include legislation to: modernise income tax, property tax, custom tariffs and social contributions; and reduce tax and tariff exemptions in all major taxes, except for a limited number of specific goods and services, especially related to exports.
Laws will also be amended to: remove most exemptions and most items eligible for zero rating (except exports); provide standardized powers to Tax Administration Jamaica (TAJ) and Jamaica Customs, to allow for electronic lodgement of transactions; and provide powers to TAJ and Customs that will enable improved auditing and arrears collection.
Dr. Phillips noted that the Omnibus Incentive Act, which will eliminate ministerial discretionary powers to grant tax relief, is to be tabled in Parliament by September of this year.
“An interim scheme that establishes caps for the different categories for discretionary waivers is now in place, but will be replaced by the Omnibus Act by the end of December 2013,” he said, adding that the process of consultations with stakeholders in the public and private sectors is in its final stages.
Additionally, clear guidelines will be provided for the tax treatment of charities under the Charities Act, which is expected to be tabled in Parliament by September 2013. “The harmonization of tax treatment of charities across all tax types is to be concluded by the end of May 2013…A new registration process for charitable organisations is to be in place by November 2013,” Dr. Phillips told the House.
A detailed action plan for implementing these reform measures is to be ready by May, he noted.
The Minister emphasised that in order to underpin these reforms, important institutional changes are being made; including institutional strengthening of the TAJ.
To this end, the TAJ is procuring a new, modern integration system to support its operations, and along with Jamaica Customs, is to acquire commercial Human Resource Information System, to modernise the organisation’s functions.
Additionally, both the TAJ and Jamaica Customs are to implement measures to encourage payments through the commercial banking system.
The Ministry of Finance will also seek to negotiate lower fee rates for doing business with TAJ and Customs, through commercial banks.
By Alphea Saunders, JIS Reporter