Jamaica negotiating J$6.5b tax-reform loan
Published:Friday | January 21, 2011 | 12:00 AM
Jamaica is now in negotiation with the United States Agency for International Development for a J$6.5-billion, five-year loan to finance a new information technology system for tax administration under the reform programme.
Minister of Finance Audley Shaw said the new system would be built with "im-pressive forensic data-mining capa-bilities and the capacity to merge all databases" and would link all departments that deal with taxes.
"This is important because it will help us to achieve the objectives of broadening the tax base and consequently, lowering taxes," Shaw said Wednesday, as keynote speaker at the monthly May-berry Investors Forum in Kingston.
"It will bea win-win situation, as the tax burden will be more equitable shared from industries and citizens alike," he said.
The new IT system will be tendered, once the financing is secured.
Shaw later told the Financial Gleaner that some of the funds would strengthen and upgrade Fiscal Services Limited (FSL), a state-owned information service company, which provides computer services, such as software development and technical support to nine government agencies, departments and ministries.
"It will include the enhancement of the FSL and its capacity to provide information to all the tax departments," he said.
When pressed by forum participants for the timeline of tax reform, which they pointed out has been slow in coming, Shaw parried that a lot of studies have been done in this area and that it was now time to move forward.
"The truth is, it's action time now and we are not going to stretch this thing out for another year," he said. "What we have decided that we are going to do, is that we are going to have a critical path as some aspectsof it cannot be accomplished in three months, it might take the year or it might take the calendar year."
Shaw, however, noted that some aspects would be implemented during this year, such as loan portability.
"And so I'm going to put myself in a position to start with the new fiscal year, in April, by announcing those things that can be implemented right then and which won't be increasing taxes. These are critical tax-reform measures," he said.
Jamaica ranks 170 out of 178 countries as one of the most tax-unfriendly jurisdictions.
A 2007 study by the Inter-American Development Bank also estimates that 40 per cent of economic activity in the country is unregistered and untaxed, and that tax exemptions and incentives have eroded half of the tax base.
The same study estimates that one per cent of corporations pay 71 per cent of the corporate income tax collected, and that one per cent of registered entities accounts for 60 per cent of PAYE collections.
Making referencing to these reports, Shaw said he would be working to improve Jamaica's position.
"I have to get out of that 170 out of 178," he said. "That is uncharacteristic of anything that I'm suppose to be associated with."