No ‘guess and spell’

Jamaicans earning above $1.7 million are to get approximately $75,000 over three years following Finance Minister Fayval Williams’ announcement of an increase in the income tax threshold to $2 million.

Williams, the country’s first woman minister of finance, opened the 2025-26 Budget Debate in Parliament on Tuesday, outlining a number of benefits for the upcoming fiscal year, including the increase in the pay-as-you-earn (PAYE) income tax threshold.

The finance minister told the House of Representatives that the threshold is to increase in three tranches – from $1.7 million to $1.8 million, then $1.9 million and finally to $2 million.

The three-year move is to begin on April 1, 2025.

Williams noted in her presentation that checks showed, in 2023, that 652,220 persons were earning up to $6 million and paying PAYE.

“Doing it this way means our hardworking taxpayers don’t have to guess and spell next year, or the next year or the next year if the threshold is going to increase… . We are a caring Government. We are a responsible Government,” said Williams in what was her maiden Budget Debate presentation.

Economist Keenan Falconer said the announcement was reflective of the tendency of consumers to make economic decisions at the margin.

He said, as a result, that the increase in the income tax threshold is likely intended to help persons offset specific expenses incrementally that they otherwise would not have had the ability to cover.

“The proposal translates to an addition of $75,000 to one’s salary over three years for persons who were earning above the previous threshold. The yearly increases are between five per cent and six per cent so they fall effectively in line with the expected rate of inflation,” the former UN Jamaica Economy Panel representative said.

Falconer said increases in the income tax threshold shift spending patterns away from Government to the consumer with the belief that they will be better able to direct their savings into stimulating greater economic activity.

Quizzed about whether Williams could have announced a $3-million threshold, Falconer said given Jamaica’s current fiscal position, it was unlikely that any further increase in the threshold could have been accommodated.

He explained that this is evidenced by the phased nature of the increase over three years.

He asserted that it would have been equally difficult to raise this within a year.

“The previous cost of $9 billion to raise it from $1.5 million to $1.7 million indicates that the cost of this increase will be at least in the double digits of billions of dollars,” he said.

During the 2024-25 Budget Debate, Williams’ predecessor, Dr Nigel Clarke, disclosed that it would have, at that time, cost the Government $23.6 billion to move the threshold to $2.1 million.

He also said it would cost $34.6 billion to raise the threshold to $2.5 million and more than $45 billion to move it to $3 million.

Clarke in 2020 disclosed that some 80 per cent of PAYE earners were not paying income tax due to the Government’s increase in the income tax threshold to $1.5 million.

Williams, who criticised the opposition People’s National Party as one of new and increased taxes, argued that when the Government reduces taxes, more people become employed.

“The result, more revenue to the Government to build more roads, provide water infrastructure, invest in the security forces, in education, health, broadband infrastructure and training of our people. That equation has eluded some who want to run this country. They are talking about raising taxes,” said the finance minister, who argued that reducing taxes was not a part of the history of the PNP.

“Deficit spending and run wid it is their history,” she stressed.

kimone.francis@gleanerjm.com