TAXATION, THE WAY OUT?
Time and again our leaders reach out and conclude that more taxation is the solution to produce extra income for the country, and to qualify our GDP status. Each time they go into that maze, they somehow lose sight of their goals, and impose new taxes, however minimal, however unprincipled to their people, and however inimical to business.
The people have no idea where the money goes, or who accounts for it; it is used so fast and furious that I wonder if the IMF thinks “where did that one come from?” Assuming they are not the ones that ordered it in the first place. Not evident are simple solutions for Jamaica’s problems, only complex alternatives. In this case an evaluation of the taxation measure should have been made earlier, especially with regard to GCT increases to compensate. Better we add the tax to consumption of imported goods and services.
The money is not due; there are no unpaid tax liabilities from your point of view, and you must pay a tax on income twice from your savings; once when you earn income on savings however little that may be: Then secondly when you withdraw some or part of it.
What happens if you saved US Dollars or some other currency? Does the same rule apply? And if so you are liable for thousands of dollars as extra taxation. Consider you withdraw US$100,000 to purchase property for development; you are required to pay 0.1% on this which is US1000 or Jamaica dollars $110,000. Mr.Audley Shaw said “Leave my Money alone.” And I tend to see that point of view, in such circumstances.
A slight digression here: Mr. Shaw has shown his response well, and I doubt that Mr. Holness would make the same effort or statement. In this regard Shaw comes across as a more aggressive and powerful leader, and sometimes a show of strength is necessary. However I gather that Audley Shaw is the one person negotiating with the IMF from the previous administration, and he let that duty escape.
Then we should consider the impact on our dollar. If more money flows out of the system, then the ability to purchase goods and services will deteriorate, and may force further devaluation of the US dollar exchange rate.
The implementation of this “”Withdrawing Tax”” policy is going to be effective on June 1, 2014, setting time for reconsideration, and time for the consuming public to consider any balances of cash and foreign currency in their bank accounts, and move to reinvest them; sending deposits to other points of service.
To retain the funds in their system banks may increase interest rate significantly to keep funds from leaving. They will certainly offer new investments, more long term, with probably insurance implications, which makes it necessary to obtain deferred taxation.
The holders of lower amount deposits will not be affected sufficiently to withdraw their money. Larger volumes will look at alternative applications including property and business. But I suspect that these will be the more affluent depositors.
I am disappointed that the political parties do not work together with the IMF, because this matter is one of National Importance. A team needs to be selected from a group of persons, financiers, and economists. Then perhaps an overseas consultant could make gainful suggestions; and then we can more understand what solutions will work.