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All available data since 2016 show that the Government of Jamaica never needed to raise taxes to cover the lost revenues from the hiking of the threshold to $1.5 million, as revenues continue to run well ahead of forecast in the last fiscal year and for the current one.
IC Insider.com gathers that while the government never wanted to increase taxes to cover the cost of the increased threshold, as data suggested that there that the lost revenues would be covered by increased revenues, the International Monetary Fund insisted that they had to increase taxes to cover the lost revenues.
With revenues running well ahead of forecast for two years running its time government start planning to cut taxes in next year’s budget forecast.
Last fiscal year revenues were $8.6 billion better than projected, just about $2 billion short of the cost of the threshold but expenditure was $5 billion lower than planned for a net improvement of nearly $14 billion, much greater than the revenues foregone.
Collector of Taxes office, Constant Spring, Kingston.
After a mere 5 months of the fiscal year to August, the Ministry of Finance has amassed a tidy $14.6 billion more than forecast for the government coffers. If the trend continues by the end of the fiscal year we should be looking at $30 billion more than budgeted and would be more than the taxes foregone by the increase in the tax threshold.
In two years, government has amassed excess tax revenues of $45 billion and assuming there were no major adjustment in the tax threshold, to $70 billion.
The increased revenues over the past three years are well ahead of the increase from new taxes levied and after taking in account a major reduction in PAYE contribution in 2016-17. Not only are the inflows running well ahead of the prior year for the last two and a half years, increased revenues are well above forecast. Two factors are contributing to this buoyancy, improved economic activities and increased taxes, helped by strong increases in corporate profits that is pushing revenues higher.
GOJ revenues inflows have been extremely buoyant since the drop in budgeted inflows for the fiscal year to March 2015. While 2015 fiscal year came up short of budget by $16 billion with revenues at $412 billion, 2016 came in with $50 billion more than the out turn for 2015 at $456 billion and 2017 with total revenues of $514 billion was $52 billion more than for 2016.
Interest cost ended $2 billion lower than projected to August this year and should and the cost should decline even more going forward, with the recent cut in Treasury bill rates by over 50 basis points.
The government gave up $10 billion in payroll taxes last fiscal year and an additional amount, estimated at $13 billion this fiscal year but the revenues are still well ahead of forecast.
With the buoyancy in tax revenues and lower interest cost on loans the government should have far more room to reform taxes in 2018 and reduce taxes as well as improve allocations for social spending.
