Economist urges careful rollout of promised tax break by either JLP or PNP

 

As the two main political parties seek to woo the electorate with the promise of major tax breaks, Economist Keenan Falconer is cautioning that the proposals must be carefully and sustainably rolled out if they are to benefit Jamaicans in the long term. 

 

He says the proposals, estimated to cost billions of dollars must be carefully implemented to ensure they do not conflict with fiscal targets in the medium term. 

 

During the launch of the Jamaica Labour Party (JLP) manifesto in St. James on Sunday, Prime Minister and JLP leader Dr. Andrew Holness announced that if re-elected, his administration would slash the base income tax rate by 10 per cent. 

 

"Over time, we will reduce the base rate of personal income tax from 25 to 15 per cent on a phased basis and shift gradually from direct to indirect taxation, which will allow hard-working Jamaicans to keep more of your paycheck," he disclosed.

 

And at a rally in Mandeville, Manchester on Sunday, People's National Party President and Opposition Leader Mark Golding hit back with what he claimed is an action plan that will ease the burden on the pockets of lower and middle income earners. 

 

"Under the PNP government that is to come, we will be increasing the tax threshold so that persons who currently pay tax at 25%, if they are earning up to three and a half million dollars a year, they will be paying tax at zero per cent under the next PNP government. We will be raising the threshold to give them a tax-free income," he proposed.

 

But Mr. Falconer said he does not foresee any of the two proposals coming into effect before the beginning of the 2027/2028 fiscal year. 

 

"Given the current fiscal profile of the country, which indicates that Jamaica is projected to run a fiscal deficit of nearly 1 per cent or $33 to $35 billion in each of the next two fiscal years, I expect that a phased implementation of each would be completed towards the end of the next parliamentary term or shortly afterwards. So it is difficult to assess feasibility given the lack of funding details. However, increasing the threshold will result in more lower income earners being removed from the tax roll completely, with everybody above the new threshold benefitting from an equal decrease in their tax liability," he reasoned.

 

Mr. Falconer added that the impact of the government's proposal would carry less financial burden.  

 

"A reduction in PAYE would impact the same number of people, but each income segment would be impacted differentially and it is likely to cost less overall, with the revenue effect being likely mitigated by a planned expansion in the tax base. So as both parties have committed to reducing or removing some other categories of taxes, I believe it is likely that these policy proposals will necessarily have to be accommodated through a re-prioritisation of expenditure in other areas," he explained.