Minister of Finance and Planning, Dr. the Hon. Peter Phillips, has debunked the notion that the recently announced tax package of $19.4 billion for June 2012 to March 2013, will lead to a contraction in the domestic economy.
“Given the significant holdings of government debt by Jamaican investors, any repayment of debt, transfers resources to Jamaican investors, which become available to them for re-investment,” he stated in the House of Representatives on June 6, as he closed the 2012/2013 Budget Debate.
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Dr. Phillips said that without increased taxes, the government would have to borrow more, resulting in an increase in the debt stock, in addition to putting pressure on domestic interest rates.
“Therefore…we have designed the tax package in such a way that every sector in the population is being asked to make a contribution to help solve this critical problem. The bulk of the contribution is expected to come from those who can afford to pay. The reduction of the standard GCT (General Consumption Tax) rate to 16.5 per cent should have resulted in a reduction in the prices on the vast majority of goods,” he argued.
Dr. Phillips explained that the Private Sector Working Group had put forward a reform package that sought to achieve a net revenue gain of $7.5 billion, but that this was before the extent of deviation from the targets agreed under the Stand-By Arrangement became apparent.
“In fact, the gap in the budget left a deviation of $43 billion not $7 billion. It therefore became necessary to design a budget that reflected both expenditure adjustments and a tax package,” he stated.
By Alphea Saunders, JIS Senior Reporter