Finance Minister Audley Shaw has suggested that Jamaicans could see a total phasing out of income tax.
Speaking with journalists after a Jamaica Labour Party (JLP) function in St. Elizabeth on the weekend, Mr. Shaw said the government's tax package is designed to shift from direct to indirect taxation.
"We are going to have to move progressively towards more and more indirect taxes, that tend to be more all-inclusive and tend to avoid the opportunities for tax avoidance/tax evasion," he said.
According to the minister, Jamaica has more than $50 million, or in excess of $70 million, with interest, in arrears, including PAYE arrears. He said if Jamaica moves towards more indirect taxes there will be greater tax compliance.
Mr. Shaw said if indirect taxation is maintained, income tax could soon be a thing of the past.
"It is quite possible that in the medium term you could see a complete abolition of personal income taxes based on the efficiency with which we target those indirect tax avenues," he said.
Expounding on how long could possibly be considered 'medium term', Mr. Shaw projected that this could be in the next five years.
Difficult task
However, a tax expert has declared that the move by Finance Minister Audley Shaw, to phase out income tax over the next five years will be a difficult task to achieve.
Denzel Whyte, Head of Tax Compliance at auditing firm KPMG, says with personal income tax a major source of revenue, the Government will be faced with a massive gap to fill.
"Personal income tax," he said, "has traditionally contributed about 19 per cent of the tax revenue in the government, and to replace it would be quite difficult.
"You have to also take into consideration the recent proposed new gas tax and the opposition that it is facing now. It would really be a tall and ambitious task to achieve."
Abandon
On Friday, the auditing firm, PwC Jamaica, suggested that Jamaica could eventually abandon its personal income tax regime, if the government continues the ongoing practice of lifting the threshold at which income earners begin to pay the tax.
With each lifting of the threshold, the number of persons paying income tax is effectively reduced.
With Thursday's announcement by Mr. Shaw, outlining a new two-step lifting of the threshold, a further 250,000 Jamaicans will be relieved of paying any income tax under the PAYE system.
In response to this development, Brian Denning, Tax Services Leader at PwC Jamaica, observed that “as Jamaica increasingly shifts from direct taxes to indirect taxes, this latest proposal could precipitate a total abolition of personal income tax (PIT) in the event that the number of individuals remaining liable to income tax renders such a regime unsustainable.”