The following is an excerpt of the presentation made by Senator Don Wehby, Minister (without Portfolio) in the Ministry of Finance and the Public Service , in the State of the Nation debate in the Senate on November 14, 2008:

The Government intends to take several steps to enhance financial management and budget processes:

Put in place measures to improve prioritisation of investments so that resources are allocated more efficiently.

Put in place a performance-based budgeting system to monitor and evaluate results of spending.

Improve accounting and financial reporting. In this regard, it is urgent to develop and implement a sound integrated financial management information system and an accrual accounting system.

Enhancement of internal and external control systems.

Increasing revenue collection

I believe tax reform is integral to 'formalising' the Jamaican economy, thus putting us on a firm footing towards sustained higher levels of economic growth. Our tax reform programme will focus on engendering greater tax compliance, simplifying the overall tax structure, while simultaneously strengthening tax administration.

There is a general consensus that Jamaica's tax system is burdensome and discouraging of taxable/formal investment and business activity. Jamaica was recently listed among the 10 (of 178) economies where it is most difficult to pay one's taxes due to the number of different tax types, payment dates and tax rates by a 2008 joint 'Paying Taxes' report by the World Bank and PricewaterhouseCoopers.

The International Development Bank commissioned a report at the end of last year which estimates that:

One per cent of corporations pay 71 per cent of Corporate Income Tax collected.

One per cent of registered entities accounts for 60 per cent of PAYE collected.

One per cent of corporations pay 58 per cent of the GCT collected.

Amalgamating payroll

To simplify the tax structure, we are pursuing amalgamation of the payroll taxes. We also have to protect our revenue inflows by broadening the tax base before we can reduce the overall incidence of taxation. To achieve this, we are focusing on strengthening the institutional capacity of tax administration by means of four strategic areas:

Organisation and management

Information and communication technology

Voluntary compliance improved through service, education and enforcement

Increased revenues

Overall, we want it to be easier and simpler for persons to pay their taxes. For example, on November 17, persons will be able to file their GCT returns electronically and next year e-filing of PAYE and corporate income tax will also be available.

Increasing Competitiveness

Another initiative which has been successful is the tax amnesty programme. It was so successful during its first month that the initial deadline of June 30, was revised, and during the period, more than $6.5 billion was collected in back taxes and more than 3,000 new taxpayers were added to the system. The Government is also committed to reforming policies that constrain competitiveness, particularly in the areas of regulations, property rights, and trade facilitation.

I also believe that foreign direct investment is going be one of the key drivers for our growth. There are currently plans in the pipeline for significant investments in tourism, the development of Jamaica as an international financial services centre, as well as plans to boost the small and medium-sized business sectors.

These initiatives, we hope, will accelerate the pace of growth in the future.

Tourism

With regard to tourism, two major projects are in the works. The first is being spearheaded by the Tavistock Group, the planned Harmony Cove development is a large upscale project planned to span some 2,300 acres of land amounting to US$5-$7 billion and will involve the construction of some 8,500 rooms.

The other major investment - Celebration Jamaica - will involve the building of some 2080 new hotel rooms and US$1.8 billion worth of investment. In addition, the modernisation of the Falmouth Cruise Ship Terminal through a partnership with Royal Caribbean Cruise Lines will bring a total investment of US$224 million and result in a minimum of 400,000 cruise ship arrivals annually.

Other major new products, related to tourism include:

Vernamfield field cargo transhipment airport

Development of the Montego Bay Commercial Centre

Expansion of the Ocho Rios Cruise Ship Terminal

Major free zone complex for the Caymanas/Fort Augusta area.

The question the government is faced with is how to capitalise upon these investments to ensure that these large investments, once made, are sufficiently integrated into the rest of the economy such that a multiplier effect is created, accelerating the development process.

It is extremely important that backward linkages with the rest of the real economy are made.

Developers need to be encouraged to use local produce from our domestic agricultural sectors, to sell the works produced by our local artists and artisans, to use local artists in their entertainment showcases, and to employ local employees in all areas of their organisations.

If such linkages are successfully made, the trickle-down effect will be enormous.

Services sector

As most of you are already aware, the Jamaican International Financial Services Centre ( IFSC) project is one that falls directly in my portfolio of responsibilities. I am pleased to announce that Phase one of this project is now complete.

During Phase one, a study was carried out by KPMG to determine the services in the international financial services (IFS) sector that Jamaica could offer on a competitive basis, as well as identify those critical success factors for Jamaica to enter the global financial market.

I have also received the final report from the IFSC Special Advisory Committee which recommends, based on the KPMG study, a strategy for Jamaica to establish an IFSC. It also provides an overview of critical legislative and regulatory implications of the proposed strategy.

At this point, we are recruiting the executive team that will lead the project forward.

I am also exploring possible synergies between Jamaica and other IFSCs in the Caribbean. With more and more Caribbean nations looking at becoming IFSCs, the question needs to be raised as to what kind of regional cooperation can exist to help us all maximise the potential benefits from being an IFSC.

Along with the public bodies, dealing with the public sector wage bill is one of the two most important areas of sustainable fiscal reform.

Since the early 1990s the wage bill has mostly fluctuated in the range of 10-12.5 per cent of gross domestic product, with dips in 1995/96 and in 2005/06. There has been substantial volatility in real as well as nominal terms, as wages either lag behind inflation or catch up to it.

Labour relations

The memoranda of understanding (MOUs) have played an important role in managing the growth of public sector wages. Starting in 2004, the government has signed MOUs, with the Jamaica Confederation of Trade Unions, each one covering a period of two years. While these have consolidated negotiations with the majority of unions, substantial parts of the public sector workforce remain outside the formal scope of the MOUs, either out of choice or because of legal constraints.

A medium-term strategy for public-sector labour relations, combined with further negotiations to limit the growth in the wage bill, is critical. The latest MOU can be credited with the further consolidation of wage bargaining and harmonisation of benefits across a number of unions.

The Government is preparing a medium-term strategy for public sector labour relations, in order to manage wages, sustain and improve quality of public workforce, and increase workforce efficiency. The strategy also includes elements to expand the MOU process to a wider segment of the workforce.

Strategic reform

In conclusion, the Jamaican economy has many weaknesses which require urgent attention, including our high public debt, consistent fiscal deficits and low levels of economic growth.

Today's world economic crisis only makes our challenges greater. However, with strategic reform we can overcome them, and I reiterate the points:

Controlling public sector balances and debt

Rationalising public bodies

Improving central government financial management and budget processes

Increasing revenue collection

Increasing growth and competitiveness

Managing the public sector wage bill

Together, we can achieve our goal - to build a platform for strong economic growth. I firmly believe if we pull together in the face of our adversities, we will successfully realise our 2030 Vision: 'Jamaica, the place of choice to live, work, raise families, and do business'.