- The Government has proposed new revenue measures expected to raise the $6.7 billion needed to fully finance the 2014/15 budget.
- The $540.1 billion budget is being funded from projected revenues and grants of $421.2 billion, leaving a financing gap of $118.9 billion.
- Dr. Phillips pointed out that the $6.7 billion must come from the introduction of new taxes.
The Government has proposed new revenue measures expected to raise the $6.7 billion needed to fully finance the 2014/15 budget.
This was disclosed by Minister of Finance and Planning, Dr. the Hon. Peter Phillips, as he opened the 2014/15 Budget Debate in the House of Representatives on April 17.
He noted that the $540.1 billion budget is being funded from projected revenues and grants of $421.2 billion, leaving a financing gap of $118.9 billion.
“This will be financed by loan receipts of $110 billion, utilisation of balances in the banking system of $1.4 billion and inflows from new measures totaling $6.7 billion,” he said.
Dr. Phillips pointed out that the $6.7 billion must come from the introduction of new taxes, which no administration likes to do, but “is required to allow us to meet our primary surplus target.”
One of the new revenue measures, expected to yield $844 million, is changes to the taxation of alcoholic beverages to provide for one unified specific rate per litre of pure alcohol on all alcoholic beverages. This will become effective on April 22, 2014.
The Minister explained that currently, all alcoholic beverages with the exception of White Over-proof Rum, are currently taxed at the rate of $1,120 per litre of pure alcohol. There is also a preferential regime for the tourism industry, which is currently $700 per litre of pure alcohol. However, under the current tax reform programme, the policy is for the systematic unification of the rates.
“We have found that the differential rates increase the administrative cost in the system and are cumbersome and difficult to administer and allow for leakage of the revenues,” he said.
The Government is also expected to gain revenue of $2.3 billion from the introduction of a levy on deposit-taking institutions and encashments from securities dealers.
“This levy will be chargeable on all withdrawals from deposit-taking institutions by way of electronic banking, point of sale transactions, cheques, automated banking machine (ABM), automated teller machine (ATM), or over the counter and internet transfers,” he said.
Dr. Phillips further explained that the levy is charged on the banks and will be charged for encashments from securities dealers, whether partial or full, according to the value of each withdrawal.
He noted that for transactions less than $1 million, the levy rate is 0.1 per cent.“This means that for transactions of $1,000, $5,000 or $10,000, the associated levy payable will be $1, $5 and $10 respectively. On a withdrawal of 100,000, the levy would be $100,” the Minister explained.
“On transactions valued between $1 million to $5 million, the levy rate is .09 per cent; greater than $5 million, but less than $20 million, the transaction rate is .075 per cent; and greater than $20 million, the transaction rate is .05 per cent,” he said.
In addition, under this measure, which will become effective on June 1, 2014, the stamp duty charged on cheque transactions will be removed.
To gain another $1 billion in revenue, the Government is also proposing that the rate of tax on gross premiums earned by regional and non-regional life assurance companies, be increased to a standard 5.5 per cent.
It is also being proposed to increase the 15 per cent income tax on net investment income to 20 per cent for all insurance companies. These new measures are to become effective May 1, 2014.
The Government has also put forward a proposal for an increase in asset tax, which is expected to yield $1.788 billion. This is to take effect on May 1, 2014.
Dr. Phillips noted that for specified entities regulated by the Bank of Jamaica (BoJ) and the Financial Service Commission (FSC), the rate is to be increased from 0.14per cent to 0.25 per cent.
“For other entities, the new scale of rates will apply: asset value of at least $50 million, a flat tax of $200,000; asset value of at least $5 million, but less than $50 million, a flat tax of $150,000; asset value of at least $500,000 but less than $5 million, a flat tax of 100,000. Asset tax for all other categories remain unchanged,” the Minister said.
An additional $1.2 billion in revenue is also expected to be earned following the proposed redirection of the percentage of the Special Consumption Tax (SCT) on petrol,which currently goes to the Road Maintenance Fund, to Central Government and the Consolidated Fund.
It is further anticipated that $250 million will be gained following the modification of the duty regime for specified motor vehicles. Being proposed are: a reduction in customs duty for vehicles 2000 cc and above; a reduction of the Common External Tariff (CET) from 30 per cent to 20 per cent for vehicles 2000 cc and above; and a reduction ofSCT rates by 10 percentage points for petrol or diesel vehicles over 3500 cc and hybrid vehicles.
Another measure which became effective April 1, 2014, and is expected to earn $26 million, relates to an increase of the age limit on second sale vehicles on which General Consumption Tax (GCT) is applicable, from eight years to 10 years.