Shaw

Jamaicans are being warned to brace for a big tax package - that could include a special levy on gasolene - as Finance Minister Audley Shaw moves to close a $55-billion financing gap in his budget.

Shaw tabled a $548-billion budget in Parliament a fortnight ago, and will today tell legislators how he plans to fund the expenditure.

But with revenue running far below projection last year and the private capital market tightening, Shaw will have to look to the multinational agencies for soft loans and the Jamaican consumer for more taxes.

Shaw has indicated that he will be going after tax dodgers but that is unlikely to close the gap.

Passport fees double

Already The Gleaner has learnt that passport fees will be doubled to $5,000 from $2,500, while the island's 40,000 licensed firearms holders will also be hit with a doubling in the cost of their permits.

Other consumers will not be spared as other government services will also be increased by up to 100 per cent and property tax seems set to rise.

"I think you are going to see GCT (General Consumption Tax) on things like water and electricity bills which have not yet attracted GCT similar to the telephone bill. In addition, the level of GCT on phonecards could be increased from the present 20 per cent to about 30 per cent," financial analyst Anne Shirley told The Gleaner.

"I would be looking for the gas tax despite the controversy surrounding it, as I don't think the Government has a choice on this.

"Also, I'm looking for increases in a lot of the smaller fees for government services which are now between $2,000 and $2,500 and can be doubled," Shirley added.

Major package inevitable

She is not alone in the belief that a major tax package is inevitable as Shaw and his team buckle under a growing debt burden and a sharp reduction in revenue collected from areas such as income tax and GCT last year.

According to Professor Don Robotham, there is no way the Government can finance the budget without new taxes.

"Very likely, there will be a tax on petroleum products. Equally likely is a substantial increase in bus and taxi fares ... Discretionary GCT and corporate tax exemptions for certain sectors (primarily tourism) will have to be revoked," Robotham said recently as he expressed concern about what he said was a $55 billion revenue gap.

"The proposed reduction in corporate income tax from 33 per cent to 20 per cent - a revenue loss of about $6 billion - will have to be shelved," added Robotham.

But Shirley believes the Government will have to offer a tax break if its new measures are to be accepted.

"I think he will increase the income tax threshold and he will try to see if there are other areas that he can give back something to make some of his measures palatable," Shirley said.

"There is not a lot of wiggle room but to the extent that he (Shaw) can find areas that he is able to do something on, I think he will try because it will be a very difficult budget for him to craft," added Shirley.

No option

Edward Chin-Mook, president of the Small Business Association of Jamaica (SBAJ), believes Shaw will have no option but to find ways to offer some breaks to taxpayers.

"This particular budget is going to be the mother of all budgets. We are facing challenging times and the leadership must offer some sweet medicine along with whatever bitter ones," Chin-Mook told The Gleaner.

"The sector is bracing for some very harsh measures but we are not going to be prepared to take them unless there are signs of solutions to the problems down the road," added Chin-Mook.

He said the proposed tax on gasolene products and GCT on utility bills should be scrapped and other creative measures implemented.

"These are the easy things but they will hurt small businesses and persons who are most vulnerable. The Government should instead go after big businesses which are under-reporting and others who are failing to pay millions of dollars in taxes.

"With a tax on gas you are going to kill the little man, you are going to kill the start-up businesses and crush their spirit," declared the SBAJ president.

Capturing tax dodgers

Shaw is expected to use today's presentation to announce a push to capture professionals and big business operators who are not paying their taxes, while consolidating some payroll taxes.

He will also present the final figures for the 2008-2009 fiscal year, but data for 11 months show the Government's collection of revenue and grants at $21 billion below projection, with most areas well short of the target.

With more fallout from the global economic tsunami expected this year, Shaw and his team know that, despite increased loan funds expected from the Inter-American Development Bank, the European Union and possibly the International Monetary Fund, it will struggle to pull in the revenue.

arthur.hall@gleanerjm.com

Professor Don Robotham:

Very likely, there will be a tax on petroleum products. Equally likely is a substantial increase in bus and taxi fares ... . Discretionary GCT and corporate tax exemptions for certain sectors (primarily tourism) will have to be revoked.

Edward Chin-Mook, president, SBAJ:

This particular budget is going to be the mother of all budgets. We are facing challenging times and the leadership must offer some sweet medicine along with whatever bitter ones.

Government revenue - Apr 2008-Feb 2009