In his maiden Budget Speech in Parliament today, Dr. the Honourable Nigel Clarke, Minister of Finance and the Public Service did something that no other Finance Minister in living memory has done: he announced a net reduction in taxes of JA$14 billion for the 2019/20 financial year.
For many years, taxpayers have burdened with new taxes annually: JA$90 billion in such taxes over the last 10 years according to Minister Clarke. His predecessor, the Hon. Audley Shaw bucked the trend in 2018/19 when he announced that no new tax measures would be required to finance the 2018/19 Budget.
In his presentation, Minister Clarke commended successive Government administrations for the fiscal discipline that has contributed to Jamaica being where it is today and also acknowledged the role that the Economic Programme Oversight Committee (EPOC) has played in the process. Minister Clarke announced his intention to establish a Fiscal Council and also institute further strengthening of the existing fiscal responsibility framework.
Minister Clarke’s presentation clearly focused on the need for Jamaica to pursue ‘growth with equity’: the urgent need to achieve economic independence and exploit economic opportunities while protecting the poor and vulnerable. Positive economic results combined with buoyancy in tax revenues has enabled the Government of Jamaica (GoJ) to reach a Staff Level Agreement with the International Monetary Fund to reduce Jamaica’s primary surplus target. This is now being moved from 7% to 6.5% of GDP one year ahead of schedule while keeping Jamaica within its targets to reach a Debt:GDP ratio of 60% by 2025/26. Minister Clarke acknowledged that this agreed reduction was critical in order to provide the GoJ with the necessary fiscal space to be able to reduce taxes to the extent announced today.
The Minister is to be commended for strategically focusing these reductions on taxes that are perceived to be a nuisance (particularly for the MSME sector) as well as taxes and duties that currently hamper the conduct of economic activity/raising of finance or dissuade persons from regularising the land titles on lots they occupy. The measures announced today are therefore important not only for the direct stimulative effect of putting JA$14 billion back into the economy but also for the potential economic activity that these measures may ‘free-up’ and facilitate.
CARICOM Tax Leader, Partner
Tel: 876 932 8423