BUDGET 2016: Shaw to take hot seat in Parliament on Thursday

Finance and the Public Service Minister, Audley Shaw, is to outline in Parliament on Thursday afternoon, the revenue sources from which the $580 billion budget that was tabled in the House on April 14 will be funded.

This is as the second-time finance minister opens the Budget Debate for the 2016-17 financial year in Gordon House where the eyes of the nation will be unusually glued this time around, due to high anticipation of a particular promise from the Government.

Shaw’s biggest challenge will be to meet – whether fully or otherwise – under International Monetary Fund (IMF) constraints - the public expectations generated by the Jamaica Labour Party’s (JLP) election campaign promise to remove income tax payments among workers earning under $1.5 million per annum, without dramatically wielding the dreaded tax axe.

The income tax commitment, which the finance minister later said had been predicated on the availability of partial funding from fuel taxes, remains on the cards despite the realisation that the anticipated funding source was a mirage.

With the JLP’s political fortunes and credibility hanging high on fulfillment of the commitment, both Shaw and Prime Minister Andrew Holness have firmly committed to honouring their word, despite wide-spread warnings mostly from private sector leaders and other interests, not to jeopardise the ongoing programme with the International Monetary Fund (IMF) at the altar of political expediency.

Hence, it is now not a question of ‘if’, but rather, ‘how’, and possibly over what period if the Government accepts calls from the same private sector leaderships to implement the measure on a phased basis over a one-year period.

Both the Private Sector Organisation of Jamaica (PSOJ) – through its Chief Executive Officer (CEO), Dennis Chung – and the Jamaica Manufacturers’ Association (JMA) through its President, Metry Seaga, have urged the Administration to go the two-step route. This involves raising the threshold to $1 million from some point this year, and then to the promised $1.5 million level, effective April 1 next year.

The business leaders said the phased implementation option would allow for the Government to have a better chance of meeting its other fiscal obligations, especially the IMF requirements, while honouring its commitment to the Jamaican workers.

Indications are that in terms of new tax measures, the Administration will not be focusing on any options that will directly impact the lower socio-income grouping in the society. Instead, mostly ‘invisible’ taxes are expected to be announced, including possibly an increase on the special consumption tax on fuel, and the introduction of a new tax on the importation of liquid natural gas (LNG) into the island, along with possibly telephone data transaction tax measures.

There are also reports of a likely increase in departure tax and yet another raid on the pleasures of smokers through an increase in the special consumption tax on the product.

The Jamaica Public Service Company (JPS) is scheduled to begin receiving LNG from its US-based partner, New Fortress Energy, from August of this year, to help fuel its Bogue Power Plant in Montego Bay, which was recently converted todual fuel capability. The plant is now able to use both LNG and automotive diesel oil (ADO), the latter of which it has been using since its commissioning in 2004.

Even before the tabling of the budget on April 14, the finance minister indicated that the Government was mindful of the economic challenges being faced by the lower socio-economic groupings within the society, and would therefore be steering clear of any tax measures that would noticeably increase that burden.