Gov’t. First Year Review: Finance Minister Highlights Five Areas of Emphasis

Taking charge of the Ministry of Finance and Public Service in September 2007, Minister of Finance and the Public Service, Audley Shaw, highlighted his Government’s five critical areas on which new emphasis would be placed, to ensure the financial stability of the country and increase its efficiency and competitiveness.
Citing debt management, tax reform, a revised energy policy, reform of the bureaucracy, and investment promotion as the focal points, he stressed that his Ministry would manage the country’s fiscal affairs in a manner that would yield higher levels of economic growth, coupled with a greater level of tax compliance, to ensure that there is adequate revenue to fund essential services.
The Minister set off very early, to articulate the Government’s economic development policies and strategies to international funding agencies and the Diaspora, in order to generate awareness and engender support, particularly from multilateral agencies, as it relates to Jamaica’s position, that cheaper money must be accessed to address its indebtedness.
Consistent with Minister Shaw’s position, he signed two agreements with the Inter-American Development Bank (IDB), one loan for US$10 million, and a grant for US$1 million. The loan is to be repaid over 25 years at an interest rate of five per cent per annum, with a 5-year moratorium on principal payments. He also announced that a further US$20 million loan was being negotiated for phase two of the road works programme.
Mr. Shaw announced that the World Bank had committed to undertake at their expense, a comprehensive study on corruption in Jamaica, budgeted to cost approximately US$250,000 or J$17.5 million. Determined to stamp out corruption and return public trust in the governance of the country, he is promulgating the enactment of provisions to impeach public officials for misconduct, corruption, abuse of office or betrayal of public trust; and the imposition of criminal sanctions for violation of the rules governing the award of Government contracts, and render such corrupt contracts null and void.
Turning to tax reform, another of the five critical areas targeted for sharp focus by the Government, Minister without Portfolio in the Finance Ministry, Senator Don Wehby, announced that a committee of experts from the public and private sectors, was appointed to review tax reform studies conducted previously.
This, with the aim of coming up with a comprehensive tax reform programme, designed to simplify the tax system, make it more equitable, remove disincentives to investment and job creation, and ensure greater compliance. In particular, he is seeking to increase the tax-free threshold, to provide relief to thousands of wage earners.
In early June, the Minister announced that the Government’s tax amnesty, a key source of increased tax revenue, was yielding great results, with April tax collection showing an 11 per cent increase over projections, and 22 per cent over the April figure last year. He informed that Revenue and Grants for April was 13 per cent above projections, and 29.6 per cent above what was taken last year April.
Meanwhile, Minister without Portfolio in the Finance Ministry, Senator Dwight Nelson, who has been given oversight responsibility for the Public Service arm of the Ministry, was also articulating the Government’s vision, while calling on civil servants to improve their performance by optimising service outputs, enhancing the sector’s image, and making the profession an attractive option for employment.
Addressing a JIS ‘Think Tank’, Senator Nelson announced that the typical $500 million allocation for training of public sector employees, would be increased under the Third Memorandum of Understanding (MOU III), a key component of the Government’s economic growth strategy.
He disclosed further that MOU III had a wage bill of $81.5 billion, which would be increased by $12.9 billion directly and an additional $3 billion for reclassification, particularly in the health sector, and another $2 billion for interim movements within scales.
At the same time, responsibility for the national airline, Air Jamaica, was returned to the Ministry of Finance, following a brief re-assignment to the Ministry of Transport and Works. Moving quickly and decisively to outline plans for the airline’s future, Senator Wehby announced that it is to be restructured for divestment in 2009, to relieve the national budget of the severe burden placed on it by the airline.
In January, four months after inheriting the Budget of the previous administration, Minister Shaw announced the basic framework for a Budget of his own.
He stated that his April 10, 2008 Budget presentation would highlight the need to build a solid foundation for the economy, make the economy competitive once again, and undertake a Commission of Enquiry on the Financial Sector Adjustment Company (FINSAC), “in order to get the record straight, so that people can read it and the lessons to be learnt.”
On energy, the Government is working on a policy towards cheaper energy, to encourage the use of flexi and hybrid motor vehicles, and those designed for diesel, bio-fuels, and other more efficient and environmentally-friendly fuels, as well as measures to promote the use of coal, liquid natural gas, and incentives for car-pooling. He announced that funds were available at a subsidised rate of interest of three per cent, through the European Investment Bank, for investments in renewable energy.
Turning to investment, Mr. Shaw informed that the Jamaica Tourist Board (JTB) had been given $140 million to ramp up its marketing of Jamaica to attract foreign investments, especially in hotels, citing confidence already placed in Jamaica by Spanish investors, who are bringing in some 10,000 hotel rooms.
Continuing to emphasise the need for Jamaica to attract legitimate investment, he also announced that his Ministry had started “a full review of the legislative framework that is going to provide the basis for opening up greater opportunities for investment in legitimate financial instruments.”
Among other plans highlighted by the Finance Minister, was the establishment of an international financial centre in downtown Kingston, which he contended could possibly start out as a regional financial centre, because of the vast amount of qualified Jamaicans who could not find work.
By early August, it was evident that the tax amnesty, a major plank in the strategy to raise the necessary funds to meet budgetary requirements, was responsible for the over-performance of tax collectorates so far this year.
Set a collection target of over $176 billion of primary taxes for the fiscal year 2008/09, and $43 billion for the three months to June, the 29 tax collectorates of the Inland Revenue Department (IRD), met the first quarter target by over $1 billion.
With the deficit for the four months amounting to $4 billion, Mr. Shaw said his Ministry was on course to meeting the $12.5 billion deficit targeted for this fiscal year.
Among other measures, which he is committed to introducing are, the independence of the Central Bank from political direction; imposition of a constitutional limit on the level of public debt; containment of new borrowings within the targets required to meet the constitutional limit; reduction in the debt-to-GDP (gross domestic product) ratio to 60 per cent; the transfer of all the proceeds from the divestment of Government assets to reduce the national debt; and consolidation of the existing wage-related statutory deductions and contributions into a single social security payment, to simplify collection and remittance.
The Minister also cited modernisation of the Customs system to improve efficiency and transparency and eliminate corruption; the growth of venture capital financing; the establishment of a contributory pension scheme for the public sector; and the development of the secondary mortgage market to enable the financing of new housing solutions.