Finance and Planning Minister, Dr. the Hon. Peter Phillips, says the levy to be charged on financial institution transactions, effective June 1, represents the option that is deemed to be the least challenging for the society’s most vulnerable.
Addressing journalists at a post-Budget media briefing at Jamaica House on April 22, Dr. Phillips said several other options that were proposed by Ministry technocrats were not deemed suitable, under Jamaica’s prevailing economic state.
These, he informed, included: increasing the rate of personal income tax and General Consumption Tax (GCT); re-introducing GCT on electricity; imposing a special consumption tax on sweetened drinks; and expanding the list of items subject to GCT; and increasing the tax take from petroleum.
“All the alternatives considered would have placed more burdens on ordinary Jamaicans…and would have had a more far reaching and negative impact on the economy,” Dr. Phillips said.
The levy, one of the revenue raising measures for the 2014/15 budget, which Dr. Phillips announced while opening the Budget Debate in Parliament on April 17, will see a tax of one-tenth of a per cent being charged on transactions of up to $1 million, which are conducted at deposit taking financial institutions and involving securities dealers.
This equates to $1 being charged on every $1,000 transaction conducted incorporating the use of electronic banking, point-of-sale negotiations, cheques, utilization of automated banking or teller machines (ATM/ABM), and internet transfers.
The levy will be also be charged on encashments from securities dealers, whether partial or in full. Exception to this is where transfers are conducted between the accounts of the same person in the same financial institution.
The Government is implementing this measure as part of efforts to raise revenue to fund a $6.7 billion gap in the 2014/15 budget, which sees total government expenditure amounting to $540 billion.
Dr. Phillips said the levy on financial transactions was deemed the option that would be least impactful, after some deliberation. He also advised that he met and discussed the proposal with financial sector interests on April 16, and that so far, no objections have been raised to the measure.
The Minister added that in order to ensure the impact would be “most restricted” on the society’s most vulnerable, “we also took a decision for a significant increase in the income tax threshold of $49,920.”
He invited persons who may have reservations about the levy “to bring some specific suggestions as to whether anything else could be found that would have as minimal an impact.”
Noting that the 2014/15 budget is “one of the tightest on record,” and that this year’s revenue package is “one of the smallest…in years,” Dr. Phillips said it is imperative that Jamaica not deviate from the 7.5 per cent budgetary surplus target, established in the Economic Reform Programme (ERP), being financed under a four-year Extended Fund Facility (EFF) negotiated with the International Monetary Fund (IMF).
“It’s not an option to deviate (nor) an option which Jamaica could choose or should even contemplate. It would negate all the sacrifices already made by public sector workers, by bond holders, by the general public who have sustained all the hardships and difficulties that have been involved in the reform effort. Further, it would put us back to square one where we would be closed out from access to the resources of the multilateral institutions and we would also be closed out from access to private capital markets,” he emphasized.
By Douglas McIntosh