Finance and the Public Service Minister, Dr Nigel Clarke is hitting back at political pundits, who say the $18 billion tax cut constitutes an election budget.
In opening the 2020/2021 Budget Debate in parliament yesterday, Clarke announced an $18 billion tax cut arising from a 1.5% reduction in General Consumption Tax (GCT), a 50% reduction of the asset tax, moving from 0.25 per cent to 0.125 per cent and an income tax credit to micro, small and medium-sized enterprises (MSMEs) earning up to JM$500 million.
However, speaking at his post-budget debate news conference at the Finance Ministry’s Heroes Circle headquarters later, Clarke rubbished the assertion of an election budget by the tax breaks, declaring that the tax cuts represent “a moral imperative”.
In seeking to justify the tax breaks, the Finance Minister asserted that spending is being increased by 4.7% overall and inflation for the fiscal year to January was about 5%.
“What we have proposed is a very responsible and prudent approach to expenditure, which is in line with inflation and by no means represents an expenditure profile that is connected to any event [election]. In fact, when one examines our budgets over the last few years and you look at the percentage of expenditure and so forth and you ask which year [an election year] you could not tell. They are all prudent in their profile [expenditure],” Clarke said.
Clarke emphasized that the tax breaks have come about in a context where there is the fiscal space for doing such. “We are very clear about this fiscal space, which is arising from our policies: (1) To reintegrate public bodies, where the opportunity exists, (2) To engage in liability management transactions (3) The over-performance of the primary balance achieved over the past four years and (4) The divestment of public assets and listing of those assets on the stock exchange,” Clarke said.
He emphasized that the Holness administration has been signalling its intention of giving back to taxpayers. The Minister made reference to last year’s removal of certain distortionary. Clarke pointed out that in announcing the removal of the distortionary taxes last year, he gave a commitment that once it is possible for a reduction in more taxes this would be done, owing that the conditions are right.
Having raised $185 billion in taxes last year, Finance Minister sees the reduction in General Consumption Tax (GCT), in particular as “a moral imperative” in giving back a little to taxpayers. This, in particularly so since the government will be embarking on its aggressive debt reduction when it plans to pay out to creditors as much as $73 billion next fiscal year. Clarke identified that the best way of giving back would be the GCT reduction, which represents the broadest means of a tax break, considering that all the other taxes are narrow and doesn’t benefit all.