Jamaica: Government’s tax policy is “worsening inequality” – opposition party

Jamaica: Government’s tax policy is “worsening inequality” – opposition party
Mark Golding
Mark Golding

KINGSTON,Jamaica, Mar. 12, CMC – The main opposition People’ National Party (PNP) says the government’s tax policy as outlined by Finance Minister Dr. Nigel Clarke in his recent Budget presentation, is worsening inequality in the country.

On Tuesday, in his contribution to the 2019/2020 Budget debate, the PNP’s spokesman on Finance, Mark Golding, accused the government of placing a heavy tax burden on Jamaicans.

In opening the Budget Debate last week, Clarke announced that the Government was “giving back” J$14 billion One Jamaica dollar=US$0.008 cents) in taxes.

But according to Golding, the government’s policy to move the burden of taxation more towards indirect taxation.

“This means the tax burden is carried by the people, including the poor and the struggling. And with the greater intake of taxes overall due the success of the tax reforms, with collections ahead of inflation and ahead of growth, it means that more and more tax is being extracted from ordinary, less well-off Jamaicans.”

“All taxpayers deserve a break! Government must spread the benefit to all Jamaicans, not just a few. All Jamaicans want to taste a slice of delicious topsy turvy cake, not just the beneficiaries of corruption and poor governance.”

Golding said that while the government’s tax plan is an incentive to many, including housing developers and people seeking mortgages it left out the majority of Jamaicans.

He reasoned that the administration could have, for example, reduced the general consumption tax (GCT) rate from 16.5 per cent, in order to benefit more people.

“The indirect taxes on consumption and fuel are a load on the backs of the majority of the people, while the more economically advantaged are privileged in carrying less and less of the load.”

The PNP’s spokesman on Finance went on to chastise the government for giving poor Jamaicans on welfare, mere crumbs under the Programme of Advancement Through Health and Education (PATH).

Golding said while he welcomed the increased allocation to PATH beneficiaries, when the money is broken down into real life terms, it’s not enough.

The Minister made much of the J$4 Billion increase in the budget for persons on PATH. This was touted as evidence that this Government is prioritizing the interest of the poorest and most vulnerable.But let us examine, in the absence of hype and back-slapping, what that increase really means for the over 340,000 PATH beneficiaries. It works out to $226 a week per beneficiary, or $32 per day. It is a drop in the bucket, and represents mere crumbs from the Minister’s table. It can’t even buy a patty. It can’t buy a bun and cheese.”

Golding also accused the Andrew Holness led administration of “dropping the ball”, despite having a Ministry of Economic Growth & Job Creation.

“This Government has failed badly at continuing the successes of the past PNP Administration in improving Jamaica’s world rankings for Competitiveness and Ease of Doing Business.

The PNP Government recognised that achieving high levels of growth even as we reduce the country’s heavy debt burden, required well-designed reforms to address the bureaucratic and structural weaknesses that are holding back the country’s economy. We were able to garner improved ratings for Jamaica in many of these indicators. I know this because I was part of the team that drove critical reforms forward to execution.”

He also called on Prime Minister Andrew Holness to restructure the government, adding that the Ministry of Economic Growth and Job Creation has become a contributor to the country’s low-growth problem.

“He needs to decentralize the excessively concentrated executive authority….But where is the growth, after three years. It simply has not worked. The unwieldy arrangements in this giant octopus of a Ministry have failed to provide adequately focused ministerial attention to critical agencies of Government. It also lacks clear lines of accountability for the impediments that are retarding Jamaica’s economic growth.There is no more time to waste. Jamaica is clearly falling behind in global competitiveness, to the detriment of our people.”

Turning to the foreign exchange market, Golding said this is a major challenge as Jamaicans have had to grapple with instability in the foreign exchange market.

He noted that the instability and is bad for business as it undermines confident decision- making, investment and growth.

“Jamaica has now committed to a free floating exchange rate, where the price of the Jamaican dollar is set by the market through supply and demand, and the Bank of Jamaica only intervenes to smooth out temporary disruptions to an orderly market. Jamaica has been assessed by the IMF as having more than adequate international reserves in the context of a free floating exchange rate.”

He also pointed to two periods of “wild swings” in the exchange rate. Adding that on both occasions, the BOJ was slow to respond, but eventually responded by selling from the international reserves to ease the devaluation pressures.

“A more timely response would have been less costly to the international reserves, to businesses and to consumers. It would also have reduced confusion and speculation as to what the Government’s exchange rate strategy really is. Why has this been allowed to happen?”

“These frightening periods with wild swings are not just the ordinary ups and downs of the market.You need to explain this to the many businesses which lost money in the rapid and dramatic rise and fall of the dollar, amidst the panic and uncertainty. Where there are these wild swings in the value of our dollar, imported goods are priced at the higher level. Businesses try to avoid foreign exchange losses.

In his presentation titled – No equity+Slow growth= Wrong Direction, Golding said several areas are in need of development, including the agricultural sector.

“We have a competitive advantage in several agricultural products. Our coffee, cocoa, ginger and sea island cotton are rated among the best in the World. However, there has been a lack of focus and innovation in pushing these industries forward, and they are not given the priority they deserve.”

He also urged the government to develop a national plan to support the emerging medical marijuana industry.

On Thursday, opposition leader Dr. Peter Phillips will make his contribution to the debate and next week, Prime Minister Andrew Holness will speak.

The Finance Minister will close the budget debate on March 20.


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