Mounting Opposition to Jamaica’s Tax Reform Proposals

President of the University and Allied Workers Union and government senator Lambert Brown has said that he cannot in good conscience support the new tax reform measures now being considered in Jamaica.

In a Sunday Gleaner column entitled, “Who Really Pays Taxes,” Brown highlighted his (op)position ; the reasons the tax reform proposal put forward by the private sector working group are unpalatable.

First,Brown gives an overview of the “regressive” GCT system, which he claims has failed to deliver its promise benefits:

During those 20 years, general consumption tax (GCT), which started out at 10 per cent, has grown to 17.5 per cent on the majority of goods and services. In respect to phonecards, it is as high as 25 per cent. In the last four years alone, more than $60 billion in new taxes have been levied on the backs of the Jamaican people.

Second, Brown goes on to show his suspicion that the reform proposal is meant to benefit one class only.

The country is being told that the proposal is intended to “ease the tax burden” on the population. Among the proposals are measures intended to reduce the amount in taxes paid by companies on their profit from 33.3 per cent to 15 per cent. This will see the Government giving up approximately $5.5 billion. Clearly, this will be a big benefit to the private sector.

The real winner in this tax-reform proposal will be certain sections of the private sector. True, some in the private sector will lose their waivers and some may end up losing their businesses too. The real losers will be the bottom 40 per cent of the Jamaican population.

On those grounds Brown states that he could not “in good conscience, support the proposed tax measures.” In making his argument that “the poor will pay” Brown makes 2 sterling points that ought not to be overlooked.

…there is no guarantee that tax rates will not move from the proposed 12.5 per cent upward in the future. Remember, GCT started at 10 per cent in 1991 and crawled to the current 17.5 per cent. It can happen again. In fact, in 2009, The Gleaner reported that consideration was being given to moving GCT up to 21 per cent. Interestingly, some of the private-sector leaders now pushing the current proposal are on record as supporting the higher rate then. What is there to stop them from doing so again?

This is a good point. What is to stop the government from benefiting now (by adding GCT to exempt goods in exchange for dropping the rate to 12.5 per cent) and also benefiting again later (by simply raising it again in a few years)?

Wouldn’t it be better to get the people who are currently not paying taxes to pay, than cause the poor and middle class to be faced with new taxes on basic items?

Fourth, given that Jamaica now faces a serious economic crisis, one section of society should not appear to be seeking benefits for themselves. This is a time for all Jamaica to come together and make sacrifices for the good of the nation. This is the time to ask not what Jamaica can do for me, but what can I do for Jamaica. If it is true that only 3,000 of 60,000 registered businesses are paying taxes, the answer must be to demand that the other 57,000 do, as the PAYE workers have to do – pay their taxes.

Lambert concludes by calling for a collective, inclusive approach in determining the new tax model.

We need an approach to tax reform that involves all the people, not just a few. The participatory model is the best way to get national consensus. We need a system that provides accountability, where measurable targets and goals are set so that, as a nation, we can constantly evaluate and make adjustments. This approach will develop a sense of responsibility among our people to recognise our obligations to pay our fair share of taxes.