Psoj boss wants $1.5-million tax plan implemented in two stages – news – jamaicaobserver. com

PRESIDENT of the Private Sector Organisation of Jamaica (PSOJ) William Mahfood has urged the Government to consider implementation of its plan to abolish income tax for workers earning $1.5 million or less annually on a phased basis.

He made it clear, however, that it was his personal position on the matter.

“I agree that it is a good proposal, but it needs to be implemented in a phased basis, and possibly maybe a part of it could be implemented in April this year and the balance of it to be implemented in January of next year so as not to disrupt [the economic programme]. Because what we don’t want is for the Government to come and put a new tax on something else without it being properly thought out, and reason it out with the various sectors that it could impact,” he said.

At the same time, Mahfood reiterated the PSOJ’s position of a wholesome tax reform, a day after Minister of Finance and the Public Service Audley Shaw announced that funds earmarked to follow through on an election commitment were no longer available to the new Jamaica Labour Party (JLP) Administration.

The JLP, during its campaign leading up the February 25 General Election, said it would provide an income tax break as one of the initiatives highlighted in its 10-point plan for economic growth and prosperity. This was outlined in its manifesto. Under the arrangement, income tax will be removed for people earning a gross annual salary of $1.5 million or less.

Shaw on Tuesday said that the JLP planned on using an estimated $9.5 billion from the gas tax to assist in funding the expected $12.5 billion that the tax plan would cost the country but the previous People’s National Party (PNP) had used up the funds. His announcement was met with harsh criticism from Jamaicans when it was first reported by the Jamaica Observer.

“We have heard a number of other associations come out and say that they are in favour of possibly looking at delaying the implementation. As I have said publicly I think the PSOJ is in favour of complete comprehensive tax reform, which would include the reduction of personal income tax to a majority of working Jamaicans,” said Mahfood.

The PSOJ boss said what it would mean for the Government is to look at the areas where the revenue needs to be made up.

“We have met with the Ministry of Finance and we have volunteered and offered to even participate in more wholesome meetings with the ministry and some of the technical people to come up with a proposal which looks at the whole entire tax requirements for the country and identify if we are going to forego some taxes on personal income tax [to see if] at these increased threshold how are we going to make up that shortfall,” he told the Observer yesterday during a telephone interview.

Economist Dr Andre Haughton also believes that if the proposal to provide an income tax break is to be properly implemented it would have to be done on a phased basis.

“The first thing is that they cannot change it from a flat threshold to having two different threshold, meaning some people cannot have a threshold of $590,000-plus while some have $1.5 [million]. It has to be a flat threshold across the board,” said Haughton.

The University of the West Indies lecturer said fundamentally, more research should have been done before the strategy outlined by the Government was proposed.

“…We see it working at $1 million and less problematic if that was the threshold. But $1.5 million is going to be problematic, especially if it is implemented in the way it was proposed. It is better to do it on a phased basis to start at $1 million and then see what the fiscal numbers are, how people adjust to their spending pattern and then we can move on from there,” he said.

In the meantime, Government Senator and President of the Bustamante Industrial Trade Union Kavan Gayle is insisting that despite Shaw’s revelation on Tuesday “workers are still optimistic”.

“Whatever he has uncovered that requires a different approach we will welcome. Any approach that would allow the Government to be at the same objective [will be OK]. You have a situation where the labour force has always been looking for a reprieve or some sort of a tax break because they have been carrying the brunt of taxation. It appears that they are still committed in looking at ways, seeking ways to make it happen so we consider that to be positive,” he said.

He pointed out to the Observer, however, that the proposal can only effectively be implemented if there is a collaborative approach.

“We also believe that it requires additionally a total review or reform of the tax system which may very well include wider collection of taxes to ensure that there is greater revenue. It may very well mean that the Government can offer a type of amnesty for those who have been evading the tax system because there is still a component of taxpayers, especially in corporate taxation, that has been somewhat avoiding the tax system and I believe that an avenue where an amnesty of some sort can be extended to incentivise those that have been invading to pay up [will allow] the Government to collect revenues,” Gayle said.

Meanwhile, General Secretary of the PNP-affiliated National Workers’ Union Granville Valentine told the Observer that his position has not changed on the proposal.

“I had difficulty with it when it was introduced; I still have some of those same questions. I really would hope that it works out for the workers so that they can benefit in a positive way, but there are clear implications that from the outset were obvious and as a result I’m not really surprised.

“I’m a little disappointed and I know the workers by extension are very disappointed because they are looking forward to it. But at the same time, the Government is our Government and if there is a way that we can make it work out, then we need to find that way,” Valentine added.

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