Jamaica To Enforce Tax Promises Following IMF Tranche Agreement

by Amanda Banks, Tax-News.com, London

19 January 2010

Jamaican Prime Minister Bruce Golding has announced that the territory has been granted an International Monetary Fund (IMF) loan agreement worth USD2.4bn over the following 27 months, that will help the territory finance its debts while it recovers from the economic crisis. The territory is struggling to finance debts faced with interest rates as high as 24%.

Under the new agreement, financed by the IMF, the World Bank and the Caribbean Development Bank at a lower interest rate, the Jamaican government will be granted a first tranche in the next few months, worth half of the total disbursement, that will help the government "to ensure that the Jamaican Dollar remains stable, that inflation is kept low, [and] that the new lower interest rate regime that will emerge after the Debt Exchange is sustained over the long term."

Golding explained that Jamaica will be required to introduce legislation to establish a Fiscal Responsibility Framework, in which the government will have to present targets to parliament, and will be held accountable for its performance in relation to those targets.

As a result of the agreement, Golding explained, the government will need to transmit data on a daily, weekly, fortnightly and monthly basis, and will also be subject to quarterly performance tests, the first of which is scheduled for March 31.

The program will include redoubling efforts to enhance tax revenues, under the Tax Administration Programme. “Adjustments will be made in Property Taxes on April 1. The level of adjustments will be tempered by an aggressive drive to collect property tax from those who have not been paying," said Golding.

"We are going to get tough. We will use our powers to advertise for sale those properties whose owners refuse to pay their tax," he continued.

According to the Prime Minister, the main focus of the Tax Administration Programme will be enforcement and collection. He emphasized that the government would be taking a hard-line approach; that instead of hiking taxes to improve collection, authorities would instead be tougher on those not paying their fair share. He also said that “fiscal burdens that have worn down the budget will be removed.”

Alongside comprehensive retrenchment measures, particularly in the public sector, there would be several other measures being taken to reduce government expenditure.

This will include, Golding said, the sale of Air Jamaica, which incurred losses last year of JMD9bn (USD100m); the sale of shares tied up in Clarendon Alumina Production, which is currently costing the government almost JMD1bn per month; the refinancing of Highway 2000, which is costing the government JMD3bn in annual interest payments; and the privatization of Norman Manley International Airport. He added that many other public assets that are not essential to government's core functions will be sold as soon as the market can absorb them.

"We want a leaner government structure that is able to direct all its energies and resources to performing properly the essential functions of the government," Golding explained.

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