Jamaicans hit with billions in new taxes

Jamaicans hit with billions in new taxes

Prime Minister Bruce Golding, who spoke after Shaw announced the heavier tax burden, said the measures were unavoidable. (File photo)

KINGSTON, Jamaica, December 18, 2009 - Jamaica and the International Monetary Fund (IMF) have agreed on the key elements of a programme that would allow the country to get a US$1.3 billion loan, and residents will literally start paying the price for it in a matter of weeks. The government yesterday announced five new tax measures that will see Jamaicans paying more for basic food items, gasoline products, and electricity.


And civil servants won't be getting another raise to help them out, either, for at least two more years.

The IMF yesterday announced that it had come to conclusion on the elements of a programme it would support with a loan under a Stand-By Arrangement with Jamaica. The chief of the Fund's mission to the island, Trevor Alleyne, said the IMF's Executive Board would consider the US$1.3 billion request - US$100 million more than the Bruce Golding administration initially asked for - in the new year.

He said the main goal of the IMF programme would be to address the country's economic imbalances and put Jamaica on a path of sustainable growth.

"Measures could include a mixture of controls on public sector salaries, some tax increases, as well as cuts in other spending," Alleyne said.

But even before the deal is signed, the government unveiled new tax measures.

Finance Minister Audley Shaw told Parliament yesterday that starting January 1st, 2010, the General Consumption Tax (GCT) will move from 16.5 percent to 17.5 percent; and the number of items exempted from the tax will be reduced, meaning that some food items including bread, canned sardines, mackerel, fresh fruit and vegetables, meat, poultry, fish, and corned beef, will attract the tax for the first time.

Additionally, GCT will be paid on electricity consumption above 200 kilowatt hours per month; adjustments will be made to the Special Consumption Tax on fuel; and tax on cigarettes will increase from J$8,500 (US$95) to J$10,500 (US$118) per thousand sticks.

Shaw said that overall the new taxes are expected to bring in an extra J$21.8 billion (US$246 million) a year.

Prime Minister Bruce Golding, who spoke after Shaw announced the heavier tax burden, said the measures were unavoidable.

"There is simply no alternative to raising new taxes, not unless we are going to start identifying which schools we are going to shut down, which hospitals and clinics we are going to close, which government department which may be providing vital services to people we are going to take out, which social safety net programme that seeks to transfer some level of assistance to the very poor and the vulnerable, which one of them we are going to shut down. We can't shut them down, we have to strengthen them and expand them," he said.

"When capital flows that would normally come in do not come in because of the global recession, when your revenues are underperforming yet you still have bills that have to be paid, salaries have to be met, we have had no alternative but we have had to borrow."

Golding said the country could no longer just borrow its way out of problems.

The Jamaica Prime Minister also delivered the news to public servants that they would not get any wage increases over the next two fiscal years.

The government is trying to cut a wage bill that is now at about J$136 billion (US$1.5 billion).

Caribbean 360