Presentation on theme: " Tax reform requires priorities to maximize impact Draws upon… ◦ “The Final Report of the Tax Policy Review Committee to the Government of Jamaica”"— Presentation transcript:
Tax reform requires priorities to maximize impact Draws upon… ◦ “The Final Report of the Tax Policy Review Committee to the Government of Jamaica” (2005) ◦ “Tax Reform and Economic Development: The Jamaican Case” (2007) by Bahl and Wallace ◦ “A Blueprint for Taxation Reform in Jamaica” (2009) by the National Planning Summit Tax Reform Committee
If sufficient revenue is not being generated, two central questions must be asked: ◦ Is government spending excessive or wasteful? ◦ Is the particular design of the tax system impeding its ability to generate revenue?
The NUMBER ONE objective should be to stimulate economic activity in order to achieve economic growth and prosperity
Next to crime and theft, inefficient government bureaucracy ranked most problematic factor for doing business Jamaica ranked in bottom ten of 183 countries assessed for ease of tax compliance. Most detrimental aspect was required number of tax payments per year.
Extend the period of validity of the Tax Compliance Certificate Design and implement a Unified Tax Return Permit GCT groups Permit bi-monthly filing for small taxpayers
Lower cost to businesses for compliance. Increased compliance. Improved fairness Lower tax administrative costs Less distraction from core business activities Higher levels efficiency in the tax system Higher levels of economic growth
Since GoJ’s position is weaker than most of its regional counterparts, it is likely that: ◦ Either the tax rate would need to be higher than the regional average. ◦ Or, the tax base would need to be wider than the regional average. ◦ Or, both.
If the social safety net is not otherwise adequate, an argument may be presented in favour of maintaining a higher than average VAT rate on a restricted base
Restricting the indirect tax base shields the rich. Focusing on the direct spending approach rather than restricting the tax base would result in net revenue savings to the government. More social protection can be afforded by using the direct spending approach.
Reduce the CIT rate Raise the personal income tax threshold Eliminate zero-ratings on supplies to government
Tax expenditures are concessions designed to provide a benefit for either a specific activity or class of taxpayers. In Jamaica, concessions relating to GCT and tax incentives are the largest amounting to about 6% and 4% of GDP, respectively.
Defended based on the assumption that they provide stimulus for economic activity, The revenue losses necessitate elevated overall tax rates. They provide a disincentive for the rest of the economy.
Compromises fairness and integrity. Encourages a culture of non-compliance.
Improved fairness and integrity. Increased compliance. Revenue increase of more than 2% of GDP from eliminating discretionary waivers. Potential gain of an additional 1.9% of GDP from eliminating other tax incentives. Stimulating growth
The three priorities for tax reform in Jamaica should be to: 1.Simplify the System of Compliance 2.Decrease reliance on Direct Taxes 3.Eliminate the Inefficient and Ineffective use of Tax Expenditures/Concessions (FIRST PRIORITY!) The Green Paper prioritizes 1 and 2 The specific actions recommended would improve all five criteria for determining the efficacy of the tax system (efficiency, fairness, integrity, growth effects and revenue generation) but, most importantly, encourage economic growth.