No New Taxes To Fund Budget

Finance and the Public Service Minister, Dr. the Hon. Nigel Clarke, on Tuesday (March 9) announced that the Government will not be introducing any new taxes to fund the $830.8-billion Budget for 2021/22.

“We are prioritising economic recovery, which we want to achieve in the quickest possible time. Increasing taxes at this time would run counter to that objective,” Dr. Clarke said.

He was opening the 2021/22 Budget debate in the House of Representatives on Tuesday (March 9).

Minister Clarke noted that “this is the sixth consecutive fiscal year where, on a net basis, we have not raised taxes and the fourth consecutive fiscal year where there will be absolutely no new taxes”.

Turning to calls for an increase in the US$50 limit for items that may be imported duty-free, Dr. Clarke informed that the Government will not be able to do so at this time.

He noted that the effect of the threshold increase would be that Jamaicans could import higher-value items without duties and taxes being levied on them.

“I understand the request, but at this time, when the Government’s revenues are falling precipitously, when we are still in the middle of a pandemic… it would be unwise to erode our revenue base with such a move,” he pointed out.

He further noted that such a move could make the domestic and retail trade uncompetitive, threatening jobs and economic growth.

Meanwhile, Dr. Clarke told the House that the Government will be abolishing the Customs Administrative Fee (CAF) for permanent exports of a value less than or equal to US$500.

“This is estimated to cost $70 million,” he said.

Customs has levied a CAF on the export of goods since 2013, replacing the customer user fee, which was deemed non-compliant by the World Trade Organization (WTO).

Dr. Clarke outlined that the CAF was set at $3,000 per customs export declaration and has remained at that level for the past seven years.

He noted that the fee has made it difficult for exporters of local goods to remain competitive, most of whom are small business owners.

“These companies… are a very important part of the productive ecosystem. They contribute to the economy through employment, taxes, foreign exchange,” Dr. Clarke said.

“They export candles, graft items, processed foods, homemade sauces, ceramics, paintings, handcrafted jewellery, cosmetics and hundreds of other items that consumers from around the world want to buy from our local manufacturers,” he added.

The Minister explained that “when somebody buys online, you buy one thing and so the shipment can have a value of $1,500 and the Government charges a CAF fee of $3,000. It’s absurd; it’s higher than the value of the product itself”.

“The customer will often absorb the shipping cost but more often than not, the exporter has to absorb these disproportionally high government fees, and this has been the case since the CAF has been introduced in 2013. When a shipment has a value of $5,000, and the government levels a CAF of $3,000 that shipment becomes uncompetitive,” Dr. Clarke stressed.

He argued that Jamaica cannot be competitive in exports under this arrangement.