Jamaican Tax Hikes Imminent, Warns PM

by Amanda Banks, Tax-News.com, London

18 December 2009

The Jamaican government has admitted that it will have to agree to introducing new taxes and measures to contain expenditure as part of an agreement on financing with the International Monetary Fund (IMF), expected to be signed shortly.

Speaking to local media on December 13, Jamaica's Prime Minister, Bruce Golding, warned that new taxes would have to be imposed almost immediately:

"Up to the end of October our revenues were running JMD17.8bn (USD200m) below projections. We have tried to contain our expenditure. We have actually tightened expenditure to the point where our expenditure is running JMD7bn (USD79m) behind projections … but you will no longer have the facility to go to the market to say lend me an extra JMD10bn. We are going to have to close the gap in this fiscal year … So more taxes will have to come."

Golding explained that performance targets are central to the IMF program, currently being negotiated between the government and the Fund. These performance targets, he said, will include reducing the deficit over the medium term. He said that in the short-term, the target would likely to be to maintain the same deficit.

Golding explained that bringing down interest rates is central to the program – with interest at up to 24%, Jamaica has the highest rates in the world. Golding said Jamaica's focus is not just how to endure the recession but was also about how to get the country on a path to recovery.

He underscored that it would be up to the government to reform the economy, albeit with the Fund’s financial support and expertise. "[The] IMF only comes in to provide … assistance particularly in a time of crisis. Part of our problem is that the economy has not for many decades diversified itself to identify new spheres of growth that can have the multiplier effect to embrace other sectors of the economy".

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