Tighter tax net -Service fees to rise, Gov't to sell more assets
April 19, 2002
By Andrew Green, Staff Reporter
Dr. Omar Davies, Finance and Planning Minister, makes a dramatic pause as he outlines to Parliament how this year's Budget will be financed during his contribution to the Budget Debate yesterday at Gordon House, Duke Street, Kingston. - Rudolph Brown/Staff Photographer
AS PROMISED, the Government announced no new taxes yesterday, to finance its Budget, but Dr. Omar Davies, Finance and Planning Minister, said the taxman was going to get more aggressive this year.
To finance the $210 billion-Budget, Dr. Davies announced several "revenue enhancement" measures when he opened the Budget Debate in Gordon House. Additionally, he said $58.3 billion in local borrowings and $26.1 billion in foreign borrowings would be supplemented by $9 billion from the divestment of public sector assets to help cover the country's financing needs.
"In looking at the entire public sector; there are several areas where services are provided either free or for a token charge," he said. "In this financial year, we will be developing programmes to recover a portion of their costs."
The respective ministries and agencies will propose the necessary changes to implement the cost recovery, he said. The 2002/2003 financial year started on April 1.
Taken together, these "revenue enhancement" measures are expected to raise $8.9 billion. This is in addition to $100 billion in tax revenues projected for the year.
"Over the years, we have identified several loopholes which have been exploited, particularly in terms of the GCT Act," Dr. Davies said. "This will be tightened through legislation."
Professionals who require certification and licensing from Government will need to show that they are paying their taxes, he said. This already applies to contractors seeking Government jobs.
"It has been the practice that several public enterprises receive special tax exemptions, including receipts of gross interest," Dr. Davies said. Action will be taken to remove these special privileges, "in particular, withholding tax on interest."
Also, the Finance Ministry is going to be "very stringent" in examining requests for waivers and the remission of taxes, he said. This applies to duties charged on motor vehicles and transfer tax on land.
Detailed audit inspections are also being conducted on the issue of Government of Jamaica Euro Bonds to ensure that local brokers who are creating new financial instruments based on the bonds, pay the appropriate taxes. He said the bonds were issued free of transfer tax, stamp duty and income tax, but income on the locally derived instruments are subject to tax.
"Achieving these targets will require adhering to a very tight programme of work," Dr. Davies said. "It requires a vigorous legislative programme as well as heightened activity by the tax authorities."
The administration was aware that over the last financial year certain taxpayers had fallen into arrears in respect of income tax, Dr. Davies said. In most cases, the sums involved, include a large amount in penalties and interest.
"Those persons who come forward and make appropriate arrangements with the Inland Revenue Department will be given special consideration in respect of relief from penalties and interest," he said. The Department will deal with them on a case-by-case basis, with the level of relief depending on the timeliness in arriving at terms for settlement and paying off the debt.
"This offer is for three months and ends July 31, 2002," he said. "There will be no extensions after July 31, and all settlements must lead to the liquidation of the debt in this financial year."
The Government's divestment programme, expected to raise $9 billion, will be pursued aggressively, he said. Projected divestments include the sale of FINSAC-related assets, including its shares in the Jamaica Grande Hotel, sale of the remaining JPSCo. shares, sale of the remaining Cable & Wireless shares and the sale of another cellular licence.
Additionally, grants and other inflows are projected to amount to an additional $8 billion.
Overall, the Government projects a deficit of 2.5 per cent of the Gross Domestic Product, down from a 3.8 per cent deficit last year.
The goal is to achieve a 0.1 per cent surplus the following year.
Audley Shaw, JLP spokesman on finance, is to give his response in Parliament on April 23.