A team from the private sector tasked with reviewing the opposition Jamaica Labour Party's (JLP) tax proposal has punched holes in the suggested reforms and has concluded that it will not work.
RJR News obtained a copy of a document titled "Assessment of PAYE Reform Proposals-Private and Confidential" which provides a detailed analysis of the JLP proposal.
In the three page document, the team assessed the JLP's proposal to remove personal income tax from the salaries of those earning up to $1.5m annually and it found the proposal wanting on various levels.
First the tax team assessed if the proposal was equitable and certain....and said it is not. It said is borne out in the fact that people earning a few hundred thousand dollars more than the $1.5 million may be worse off than those earning that sum...because of the tax they would have to pay.
It did an assessment on two salary levels...one earning $1. 5 million now...and the other earning $1,592,800
It says excluding the impact of other statutory deductions...the person earning more money would take home $157,000 because of his tax liability with the JLP's proposal.
The tax team said given that distortionary impact...people earning up to $1. 8 million may ask their employees for a salary cut, just to take home more money.
The team said the proposal would discourage people from seeking more money either from bonus, overtime, promotion or pay increases which may marginally increase their annual income above $1.5 million .The team said the same issue would arise for those earning marginally above $5 million.
Those people would be required to pay tax on all their income without a threshold...and may also request a pay cut to ensure more money is available to take home.
The tax team says such moves may create "significant headaches for payroll administrators" who would have to contend with shifting tax obligations for employees who may earn monies over the tax threshold.
The private sector tax team says JLP's tax proposal not feasible and it would be better if the government revisits the Private Sector Working Group's tax proposals which were submitted in 2012...because that document is clearly a more preferable approach to income tax reform.
Justice Minister weighs in
Justice Minister Mark Golding in commenting on the proposal said it has not received backing from stakeholders.
"I think it is important to note that the proposal has not received strong support from persons out there who know about tax matters and economics. In terms of the funding of the proposal, it will cost a great deal of money to give away that revenue," Golding said.
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