Tax experts on Wednesday voiced concerns about the recently tabled Green Paper on tax reform, chief among them the potential impact on low-income earners.
"The reform is shifting tax to persons in society less able to pay ... and there must be some provisions consider to mitigate this concern," said Ena Wong Sang, a local business owner speaking at an Institute of Chartered Accountants of Jamaica (ICAJ) forum on the Green Paper for tax reform on Wednesday in Kingston.
Business interests, however, hold a different view on how the impact on low-income groups should be managed.
"We do recognise that a shift from direct taxes on income towards indirect taxes or tax on consumption is a regressive move," said Joseph M. Matalon, president of the Private Sector Organisation of Jamaica, "That is recognised; and what was proposed and is being proposed again today is that we not attempt to pursue what are legitimate social welfare policy issues/measures through the tax system, as it only serves to make the tax system more complex, reduce compliance and create a whole range of other problems."
In May, Minister of Finance Audley Shaw tabled a discussion paper outlining several proposed reform to the Jamaican tax system.
On Wednesday, he said the nine-member Jamaica Parliamentary Tax Committee, established in July, would begin deliberations in September (see insert for committee members).
For the most part, the discussion paper favours a shift towards greater reliance on indirect taxes with the broadening of the tax base and reduction in the general consumption tax rate.
It also proposes a reduction in personal income tax while increasing the threshold.
Of major concern to business is that the brunt of the reforms would be borne by the agricultural and manufacturing sector.
"There are a number of issues; there is the contention that an inordinate share of the burden of adjustment arriving out of the proposed reform will fall on the productive sector, and, in particular, the manufacturing sector, as well as the agricultural sector," said Matalon.
"It is so because a custom administration fee is to be imposed at the point of importation and that represents an absolute increase in the cost of production for manufacturers," he said.
Forum presenter Ethlyn Norton-Coke, chairman, ICAJ taxation committee and legal and compliance officer at the University of Technology, said for one client, total duty of J$34,807.59 now paid at the port is expected to rise to approxi-mately J$1.2 million with the implementation of the new tax proposal.
"It presents serious cash flow implications," said Norton-Coke.
The reform proposes either a custom administration fee that is imposed on a select group of products to yield revenues of J$6.7 billion, or on all products to earn up to J$21 billion.
The forum proposed that a case should be made for protection of the agricultural sector over the long term.
The reform proposals were also criticised for what the Green Paper has left out of the reform mix.
"It does not address the energy side, neither does it give any methodology or parameters upon which the reform is set up, and it does not address the tourism industry which gets 20 per cent of government incentives," said Allison Peart, country managing partner and tax partner at Ernst & Young.
"The customer service aspect and more on the softer side of how the taxpayers are treated also needs to be addressed," added Norton-Coke.
Submission of comments and suggestions on the reforms have been invited in writing to: The Chairman, Parliamentary Tax Committee, Houses of Parliament, Gordon House; 81 Duke Street, Kingston.
The deliberations of the committee thereafter will lead to a final policy paper - a White Paper. Implementation of the new policies are proposed for 2012.
"The reform is shifting tax to persons in society less able to pay ... and there must be some provisions consider to mitigate this concern," said Ena Wong Sang, a local business owner speaking at an Institute of Chartered Accountants of Jamaica (ICAJ) forum on the Green Paper for tax reform on Wednesday in Kingston.
Business interests, however, hold a different view on how the impact on low-income groups should be managed.
"We do recognise that a shift from direct taxes on income towards indirect taxes or tax on consumption is a regressive move," said Joseph M. Matalon, president of the Private Sector Organisation of Jamaica, "That is recognised; and what was proposed and is being proposed again today is that we not attempt to pursue what are legitimate social welfare policy issues/measures through the tax system, as it only serves to make the tax system more complex, reduce compliance and create a whole range of other problems."
In May, Minister of Finance Audley Shaw tabled a discussion paper outlining several proposed reform to the Jamaican tax system.
On Wednesday, he said the nine-member Jamaica Parliamentary Tax Committee, established in July, would begin deliberations in September (see insert for committee members).
For the most part, the discussion paper favours a shift towards greater reliance on indirect taxes with the broadening of the tax base and reduction in the general consumption tax rate.
It also proposes a reduction in personal income tax while increasing the threshold.
Of major concern to business is that the brunt of the reforms would be borne by the agricultural and manufacturing sector.
"There are a number of issues; there is the contention that an inordinate share of the burden of adjustment arriving out of the proposed reform will fall on the productive sector, and, in particular, the manufacturing sector, as well as the agricultural sector," said Matalon.
"It is so because a custom administration fee is to be imposed at the point of importation and that represents an absolute increase in the cost of production for manufacturers," he said.
Forum presenter Ethlyn Norton-Coke, chairman, ICAJ taxation committee and legal and compliance officer at the University of Technology, said for one client, total duty of J$34,807.59 now paid at the port is expected to rise to approxi-mately J$1.2 million with the implementation of the new tax proposal.
"It presents serious cash flow implications," said Norton-Coke.
The reform proposes either a custom administration fee that is imposed on a select group of products to yield revenues of J$6.7 billion, or on all products to earn up to J$21 billion.
The forum proposed that a case should be made for protection of the agricultural sector over the long term.
The reform proposals were also criticised for what the Green Paper has left out of the reform mix.
"It does not address the energy side, neither does it give any methodology or parameters upon which the reform is set up, and it does not address the tourism industry which gets 20 per cent of government incentives," said Allison Peart, country managing partner and tax partner at Ernst & Young.
"The customer service aspect and more on the softer side of how the taxpayers are treated also needs to be addressed," added Norton-Coke.
Submission of comments and suggestions on the reforms have been invited in writing to: The Chairman, Parliamentary Tax Committee, Houses of Parliament, Gordon House; 81 Duke Street, Kingston.
The deliberations of the committee thereafter will lead to a final policy paper - a White Paper. Implementation of the new policies are proposed for 2012.