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I know tax is not a popular subject... Who wants to discuss developmental ideas when we can discuss the skin shade of a beauty contest ? .. Here in this article is a gem that i have wondered about.. only 1/3 of Jamaicans in the PAYE system pay tax....
the alternative is consumption tax that is easier and less stressful than chasing down the fellow who runs the pan chicken on hte street....
If a government does this they will be characterised as hating poor people... But the person who avoids tax will be the cause...Like Johnny Cakes who rented out his property and did not pay local tax on he income. But claimed he was justified because he had invested money into the property..
Tax compliance is a joke in Jamaica....This is the easiest fix for a goverment.. But it will shift the burden down to the least able to afford.. it will happen.
Shifting away from income tax to consumption tax easier said than done
3:55 pm, Mon August 17, 2015
By Dashan Hendricks
Another call has been made for the Jamaican Government to target indirect taxes to finance its expenditure; that is, shifting from income tax to consumption tax. It's a suggestion which is good in theory, but one which may not be adopted by politicians.
The reasons are many. Here I list a few.
While it may be construed as an incentive to labour to shift the tax burden from employment to consumption, the impact would not be the same on all groups. It could be argued that those at the lowest echelons of the income ladder would be hurt more disproportionately than those at the top.
This is why. Many of those at the bottom of the income ladder currently pay no income tax, simply because their income falls below the tax threshold of $557, 232 per annum. In fact, with that threshold, fewer than 300,000 Jamaicans pay income tax out of a working population of 1.1mn.
Many of those who exist below that income tax threshold live at what I call “the survival level." It is a level at which basic consumption accounts many times for up to 80 per cent of their weekly spending. If the burden of taxation is shifted from employment (regardless of how I hate paying some of these employment taxes) to consumption, then the consumption tax - the General Consumption Tax (GCT) - will be considered on more products than it is currently on. In effect, that means it will be extended to basic items such as flour, rice, sugar, chicken and the like.
For those who are earning at "the survival level", a tax on the items which account for a huge chunk of their salary will, in effect, become a price increase for them, equivalent to the rate of the taxation. What that will do is constrain spending among that group even more than a weak economy has been doing. The impact will be to drive these valued constituents of politicians further into poverty and affect the electability of the government at the polls.
Then there is the issue of collecting the tax. While the administration of GCT collection is robust, to a large extent, the amounts to be collected still depend on the honesty of those returning the tax. It is that issue of trust which has led the government to increase the frequency of collection of GCT. It is more assured that it will get the employment taxes than the consumption taxes, unless, like it has done with petrol, it collects the taxes at source. Doing so would require a huge bureaucracy.
the alternative is consumption tax that is easier and less stressful than chasing down the fellow who runs the pan chicken on hte street....
If a government does this they will be characterised as hating poor people... But the person who avoids tax will be the cause...Like Johnny Cakes who rented out his property and did not pay local tax on he income. But claimed he was justified because he had invested money into the property..
Tax compliance is a joke in Jamaica....This is the easiest fix for a goverment.. But it will shift the burden down to the least able to afford.. it will happen.
Shifting away from income tax to consumption tax easier said than done
3:55 pm, Mon August 17, 2015
By Dashan Hendricks
Another call has been made for the Jamaican Government to target indirect taxes to finance its expenditure; that is, shifting from income tax to consumption tax. It's a suggestion which is good in theory, but one which may not be adopted by politicians.
The reasons are many. Here I list a few.
While it may be construed as an incentive to labour to shift the tax burden from employment to consumption, the impact would not be the same on all groups. It could be argued that those at the lowest echelons of the income ladder would be hurt more disproportionately than those at the top.
This is why. Many of those at the bottom of the income ladder currently pay no income tax, simply because their income falls below the tax threshold of $557, 232 per annum. In fact, with that threshold, fewer than 300,000 Jamaicans pay income tax out of a working population of 1.1mn.
Many of those who exist below that income tax threshold live at what I call “the survival level." It is a level at which basic consumption accounts many times for up to 80 per cent of their weekly spending. If the burden of taxation is shifted from employment (regardless of how I hate paying some of these employment taxes) to consumption, then the consumption tax - the General Consumption Tax (GCT) - will be considered on more products than it is currently on. In effect, that means it will be extended to basic items such as flour, rice, sugar, chicken and the like.
For those who are earning at "the survival level", a tax on the items which account for a huge chunk of their salary will, in effect, become a price increase for them, equivalent to the rate of the taxation. What that will do is constrain spending among that group even more than a weak economy has been doing. The impact will be to drive these valued constituents of politicians further into poverty and affect the electability of the government at the polls.
Then there is the issue of collecting the tax. While the administration of GCT collection is robust, to a large extent, the amounts to be collected still depend on the honesty of those returning the tax. It is that issue of trust which has led the government to increase the frequency of collection of GCT. It is more assured that it will get the employment taxes than the consumption taxes, unless, like it has done with petrol, it collects the taxes at source. Doing so would require a huge bureaucracy.
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