Several business leaders are welcoming the $18 (1h 12m) (1h 12m) billion in tax cuts announced by Government, saying that it will provide economic stimulus, particularly at a time when the country is dealing with the coronavirus (COVID-19) pandemic.
Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, announced the tax breaks as he outlined how the Government will be funding the proposed $853 (56h 53m) (56h 53m).5-billion expenditure for the upcoming fiscal year, when he opened the 2020/21 budget debate in the House of Representatives on Tuesday (March 10).
The cuts include a 1.5 percent reduction in General Consumption Tax (GCT) to 15 percent, effective April 1, which will see the Government foregoing $13.96 (0h 56m) (0h 56m) billion in revenue.
Also, there is a reduction in Asset Tax from 0.250 percent 0.125 percent, which will free up $3.02 (0h 13m) (0h 13m) billion; and a net income tax credit of $375,000 (25000h 0m) (25000h 0m) for regulated and unregulated companies with annual sales/revenue equal to or less than $500 (33h 21m) (33h 21m) million, which will result in a potential revenue loss of just over $1 (0h 4m) (0h 4m) billion.
Minister Clarke also announced a 50 percent reduction in Jamaica Agricultural Commodities Regulatory Authority (JACRA) fees.
Jamaica Employers Federation (JEF) President, David Wan, tells JIS News that the Budget is “quite positive,” with the stimulus “coming when it is most needed at the onset of COVID-19 in Jamaica.”
“The virus is likely to have an impact on businesses and the fact that the assistance being extended is going to help small businesses is even better because they are the ones that can least afford major disruptions,” he notes.
He said that the reduction in GCT is also positive for consumers.
Mr. Wan further welcomes the announced $73 (4h 52m) (4h 52m) billion accelerated payment on the national debt, which enables the Government to reduce the budgeted primary surplus to gross domestic product (GDP) ratio of 6.5 percent, by 1.1 percent.
Dr. Clarke indicated during his budget presentation and his post-budget media briefing on Wednesday (March 11) that the reduction will lower the primary surplus requirement by $23 (1h 33m) (1h 33m) million, which will be at the Government’s disposal.
Some $7 (0h 28m) (0h 28m) billion of this sum is earmarked as contingency funding to strengthen Jamaica’s COVID-19 response.
Minister Clarke said the $73 (4h 52m) (4h 52m) billion payment, which represents 3.3 percent of GDP “will put us on track to reduce our debt-to-GDP ratio to below 84 percent by the end of the upcoming financial year (March 31, 2021).”
“We’re out of the International Monetary Fund (IMF) program arrangement and I think everybody expected that, at some point, it had to come down, because it is almost contractionary to have that (6.5 percent) level of a primary surplus,” Mr. Wan argues.
He further contends that “to bring it down now, given that we are ahead of where we thought we would be in the debt-to-GDP ratio, is quite appropriate and very wise to create some more resources.”
Small Business Association of Jamaica (SBAJ) President, Hugh Johnson, is also applauding the announced revenue cuts, particularly the revision to the business tax threshold, which he notes, will directly benefit the SBAJ’s membership.
“We have been asking for these things for decades. Now that they are coming, we need to grab them with both hands to allow our businesses to flourish,” he says.
Mr. Johnson, (Small Business Association of Jamaica (SBAJ) President, Hugh Johnson) in the meantime, points to the need to accelerate production, in light of COVID-19.
“It’s only through ramped-up local production that we will be able to continue to see any economic growth because of this crisis worldwide,” he contends.
Jamaica Manufacturers and Exporters Association (JMEA) President, Richard Pandohie, for his part, tells JIS News that the Budgeted provisions are “very good”.
“It represents a roadmap that illustrates the fiscal responsibility that is now entrenched. It is showing where we have been, where we are now, and where we’re going to go,” he tells JIS News.
Additionally, Mr. Pandohie says the Budget, “very important, further reduces taxation on the Jamaican populace” and “is a step in the right direction.”