“T&T ranks the best among Caribbean counties for business taxes. Jamaica not so good, since GCT (sales tax) is included” is the story heading of a Facebook post from a Caibjournal.com article compiled from a World Bank report.

The problem is that one has to be careful in making definitive statements as the comparisons may not be correct. First off, one would need to look at the overall tax situation in each country  to get a better picture. In Jamaica, a large part of the tourism sector is free from corporate taxes or because of large capital allowances, pays less. Most of the agricultural sector pays no corporation taxes at all. Data in Jamaica also shows that approximately 70-80 percent of taxes are paid mostly by the Jamaica Stock Exchange listed companies. Hence,  it is difficult to come to the conclusion that Jamaican companies pay as much taxes as the article suggests.

The reality is that after corporate taxes of 33⅓ percent on profits after capital allowances, payroll taxes are next in size. Other taxes are very small and would make no meaningful impact on the total tax collected apart from financial entities and a few others who can’t recover the full impact of GCT.

Since GCT is not direct a tax on the majority of corporations, this leaves payroll taxes that corporations are required to make a contribution. Even then, only the portion that the company absorbs is the true cost since payroll taxes are deducted from income before corporate taxes. It is difficult to see how the nominal tax rate of 33⅓ percent could hit 44.3% in Jamaica. Additionally, since 2013, some corporations pay 25 percent and some 30 percent.

The CaribJournal.com stated that “The World Bank defines the total tax rate as the “amount of taxes and mandatory contributions payable by businesses after accounting for allowable deductions and exemptions as a share of commercial profits. Taxes withheld, such as personal income tax, or taxes collected and remitted to tax authorities like VAT or sales tax, were excluded in the data”.

Jamaica may end being the country with the highest effective tax rate for some corporations but more details are needed to make this conclusion.

If the data on the various countries is close to reality, then there is a huge difference between Jamaica and Trinidad of 50 percent. If true, it explains why Jamaica finds it difficult to compete with Trinidad.

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November 2013 was the worse month for Government of Jamaica revenue collections for the current fiscal year which started in April, coming in at $25.94 billion. The next lowest was August at $26.36 billion and October at $26.5 billion. The November collections were $2 billion short of the estimate of $28.55 billion forecasted by the Ministry of Finance when it presented the budget earlier in the year.

The shortfall in August was the worse reported as it was down by $6 billion compared to forecast. The best month was May which exceeded forecast by a billion dollars, all other months were short of budget. The data is reflecting a troubling trend of a likely shortfall going forward.

The reduction in the fiscal deficit that was at $9 billion at the end of October has been sharply cut and now stands at only $5.1 billion as the deficit for November that was planned at $1.3 billion hit $5.4 billion instead. Expenditure planned at $29.8 billion for the month ended at $31.3 billion instead, as payments on wages and programmes, climbed above the budgeted figures by $3.6 billion, to compound the impact of the revenue shortfall. The fiscal deficit sits at $24.9 billion versus $30 billion originally projected to November. Total revenues, which are $233 billion is up by a strong 10.6 percent over the 2012 period of $211 billion but is down by roughly nearly 3.5 percentage points. The budget called for an 18 percent rise in revenues for the fiscal year over that of 2013 to reach $407 billion with revenues to have risen by 14 percent up to November.

The number of areas with improved revenues paled in comparison to those that under-performed as tax revenues fell short of forecast by $10.4 billion, partially offset by increased grants of $1.1 billion and non-tax revenues of $1.37 billion. Corporation Taxes delivered $1.1 billion more than planned by 8 percent; others to have performed ahead of forecast are Special Consumption Taxes by 7 percent with a surplus of $550 million; Motor Vehicle licenses 12.6 percent with a surplus of $191 million; Telephone Call Tax, 6 percent better with $246 million; Accommodation Tax up by $400 million or a huge 55 percent improvement and Travel Tax with an increase of 57 percent or $2.3 billion.

The underperformers overwhelmed the good performances with PAYE dropping $2.45 billion; tax on dividend, individuals and on interest falling by $2.5 billion; betting gaming was down $842 million; education tax by $935 million; Contractor’s levy by $305 million; Stamp Duty by $700 million and taxes on imported items by $7.7 billion as imports fell during the period.

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The Jamaican government’s fiscal deficit projected at $28.78 billion is running below target at $19.55 billion, a savings of $9.2 billion up to October this year. The projection for the full fiscal year is deficit of $8 billion. The improved position is mainly due to a near $15 billion cut in payments partially offset by a $5.5 billion reduction in revenues.

Tax revenues were off by $6.7 billion and non-tax revenues were up by $1.3 billion. Major revenue shortfall came from PAYE $2.75 billion, tax on interest of $1.2 billion and custom duties, GCT and Special Consumption tax on international trade of $5.2 billion. There was an improvement in travel tax of $2.4 billion.

Interest cost was down by $5.4 billion and capital expenditure by $6.2 billion and there was a $2 billion savings on salaries and wages.

The deficit in October is $9.4 billion, some $2.3 billion better than the amount budgeted for, and compared to a surplus in September of $7.66 billion.  Revenues in October was $1.5 billion short of projections.