Govt. Introduces Minimal Tax Package to Fill $1.7b Budget Gap

Minister of Finance and the Public Service, Hon. Audley Shaw, early this morning announced what he described as “a minimal tax package”, with increases on Departure Tax, as well as the General Consumption Tax (GCT) on telephone calls and instruments.
Mr. Shaw made the announcement shortly after midnight, minutes after the Standing Finance Committee (SFC) of the House of Representatives finally ended a marathon 13-hour session which started shortly after 10 a.m. at Gordon House. The committee reviewed the First Supplementary Estimates, which Mr. Shaw tabled last week Tuesday (September 22).
Prime Minister the Hon. Bruce Golding, who made a commitment last week to make “a very important speech” in the debate, regarding Jamaica’s economic future, started speaking at minutes to one o’clock this morning.
Mr. Shaw, opening the debate on the Supplementary Estimates, said that the taxes, which come into effect on October 1, would finance a $1.7 billion gap in the 2009/10 Budget. The budget now stands at $561.5 billion, after absorbing an additional $153 million yesterday to reinstate the Ministry of National Security’s social intervention programmes.
The $1.7 billion will help the Government meet a targeted 8.7% fiscal deficit, up from 6.6%. The increase in Departure Tax is expected to reap $609 million, and the increase in GCT on telephone use should bring in approximately $1.1 billion.
Mr. Shaw said that the Government is projecting revenues and grants of $315 billion, down from the $339.3 billion projected in the original budget. He noted that the revised budget included over $150 billion in amortisation payments on outstanding debt.
He also announced that the Government intends to conclude an agreement with the International Monetary Fund (IMF) by the end of November, as well as create a central treasury management system for central government and public bodies.
Mr. Shaw said that there were broad areas of agreement between the Government and its multilateral partners, including the IMF.
He envisioned a gradual recovery in the economy starting in 2010, and projected inflation of about 10% this year.
Responding to the Minister, Opposition spokesman on finance, Dr. Omar Davies, said that the Opposition understood the need to revise the budget, in light of the global economic crisis, and was ready to work with the Government, but with conditions.
He also accused the Government of under-estimating its expenditure in the original budget figures, mainly its interest payments, and an over-estimation of revenue collection.
He said that the critical issue which had affected the budget was the $16 billion in interest payments, which had to be met in the supplementary estimates.