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Jamaica Embarks On Tax Grab In 2014/15 Budget

by Mike Godfrey,, Washington

21 April 2014

Jamaica is to increase taxes on deposit-taking institutions, life insurance companies, asset holdings, alcohol, and motor vehicles to raise the JMD6.7bn (USD61.1m) needed to balance its 2014/2015 Budget. The Budget also proposed an increase to the personal income tax-exempt threshold from 2015.

Peter Phillips, Jamaica's Minister of Finance and Planning, announced the new measures in the House of Representatives saying the budget shortfall could only be financed through tax hikes.

The Government will raise JMD2.3bn from a progressively lower financial transactions tax on deposit-taking institutions and securities dealers, beginning at a rate of 0.1 percent on transactions of up to JMD1m in value.

In addition, entities regulated by the Bank of Jamaica (BoJ) and the Financial Service Commission (FSC) will face rates of between 0.14 percent and 0.25 per cent on asset holdings. For other entities, for assets worth between JMD500,000 and JMD5m, a flat tax of JMD100,000 will apply; for assets worth more than JMD5 million but less than JMD50 million, a flat tax of JMD150,000 will apply; and for those with assets of at least JMD50 million, a flat tax of JMD200,000 will apply.

The Government is proposing that the rate of tax on gross premiums earned by regional and non-regional life assurance companies will be increased to a standard rate of 5.5 per cent.

Reform of Jamaica's alcohol tax system will yield a further JMD840m. Preferential treatment of certain alcohol sold to tourists will be repealed, and a unified rate will be levied per liter of pure alcohol.

Another measure which became effective April 1, 2014, and is expected to earn JMD26m, relates to an increase of the age limit on second sale vehicles on which General Consumption Tax (GCT) is applicable, from eight years to ten years.

Another JMD250m will be generated from the modification of the duty regime for specified motor vehicles. A number of measures are proposed, including: a reduction in customs duty for vehicles with engines of 2000 cc and above; a reduction of the Common External Tariff (CET) from 30 percent to 20 percent for vehicles 2000 cc and above; and a reduction of Special Consumption Tax (SCT) rates by 10 percentage points for petrol or diesel vehicles over 3500 cc, and hybrid vehicles.

One significant tax cut has been proposed for introduction in 2015. The personal income tax-exempt threshold is to be increased to JMD557,000 to remove another 13,000 people from the tax base, costing the Government JMD650m.

TAGS: Finance | tax | sales tax | insurance | budget | Jamaica | excise duty | individual income tax

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