Apr 2009 Financial News

Fuel tax plugs gap - Income threshold up - GCT bitters salt, syrup, soup prices

Apr 24, 2009

REVENUE FROM an increase in the tax on petrol is expected to plug a vast section of an $18-billion hole in the national Budget.

Finance Minister Audley Shaw said in Parliament yesterday that $13.3 billion is to be collected from the $8.75 tax that has been imposed on each litre of gas.

Shaw, however, said that while most of the revenue from the tax on fuel will be channelled into the Consolidated Fund, the Government is com-mitted to putting a portion in the Road Maintenance Fund for infrastructure work.

Expected revenue

"The road main-taining fund will this year receive 20 per cent of the fuel tax. Next year, it will receive 30 per cent and in the third year of this fuel tax, the Road Maintenance Fund will be allocated 50 per cent," Shaw said.

In opening the 2009-2010 Budget Debate in the House of Represen-tatives yesterday, the finance minister said the Budget would be financed by $321.1 billion in expected revenue, 86 per cent of which will come from taxes.

The finance minister also said the Government's borrowing programme would see it seeking $215.8 billion - $29.4 billion externally and $186.4 billion locally.

Based on the revenue forecast and the expenditure budget to be approved by Parliament, Shaw's $556.7-billion Budget had a gap of $18.1 billion, the bulk of which will be funded from the petrol tax.

In outlining his rationale for his tax package, Shaw said the Govern-ment's decision has been guided by two core principles.

"Fiscal responsibility and equity. We believe that collectively these measures will allow us to meet our commit-ments to the Jamaican people, increase the fairness of the tax system and better position the Jamaican eco-nomy over the long term," Shaw said.

"More people are given an opportunity to share the burden that we all face in the country."

Gct reform

But petroleum is not the only consumption item that is to be subject to new taxes.

Under the reform of the general consumption tax (GCT), which is to yield $7.5 billion in revenue, items such as salt, rolled oats, syrup, fish, cock and noodle soup will now be subject to 16.5 per cent GCT.

The taxman has also targeted telephones, the importation and sale of which will now attract 20 per cent GCT. Government expects to earn $736 million from this move.

Another $2.5 billion will be earned from the removal of personal income-tax preferences and the imposition of withholding tax on dividends paid to non-residents.

Government, meanwhile, has moved to ease the burden on PAYE workers.

Effective July 1, the income-tax threshold will be increased from $220,272 to $320,736. It will again be increased on January 1, 2010, to $441,168.

Shaw said the increase in the threshold would result in revenue losses of $5.2 billion.

Pensioners will also benefit from the increase in the threshold. Persons aged 55-65 will see the non-taxable portion of their pensions increase to $400,736 from $265,272. Those over the age of 65 will see their threshold move to $480,736.

Stamp duty and transfer tax will also be reduced. Stamp duty has been reduced to three per cent from 4.5 per cent while transfer tax has been reduced from five per cent to four per cent.

The Government has been forced to search for new avenues to raise funds following a decline in demand for bauxite as a result of the global economic crisis.


Source:
Daraine Luton, Staff Reporter
daraine.luton@gleanerjm.com
Jamaica Gleaner
Friday April 24, 2009

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