KINGSTON, Jamaica, Dec 17 2016 – Jamaica will boost its tax revenues and strengthen its fiscal sustainability program for economic growth with a $50 million loan approved by the Inter-American Development Bank (IDB).
This is the third and final operation of a policy-based loan series, providing budget support for the government’s fiscal policy reform. The first operation was approved in February 2014 and the second in August 2015.
The expected results of the operation are an increase in tax revenues through tax reform; annual audits performed by Tax Administration of Jamaica; and a steep rise in the percentage of self-financing public bodies with audited financial statements submitted on time.
The full implementation of the tax reform was completed when all taxpayers under the old regime chose between subscribing to the new regime or elected to have their tax exemption benefits expire under the old regime. Entities that had been benefitting under the old Incentive Act had the opportunity to continue to enjoy those benefits until their incentive period expires.
This mechanism of grandfathering allows minimal disruption within the economy. The effects of the tax reform have been a tax expenditures reduction from 6.5 percent of GDP in 2011 to 3.5 percent in 2014, a strong recovery of tax revenue going from 23 percent of GDP at the beginning of FY2014/15 to 25 percent of GDP reported in May 2016 and; higher employment and growth rates.
The programme also aims to further reduce distortions and improve efficiency of the tax system to promote growth, competitiveness and equity and to contain public expenditure. Furthermore, it will assure a binding commitment to long-term fiscal sustainability.
“Jamaica has taken the right steps towards securing a sustainable fiscal path and higher growth rates. The economy’s growth projections for 2016/17 stand at around 1.8 percent, based on the improvement in bauxite exports, higher tourism receipts, remittances ––which boost domestic demand–– and an upturn in agricultural production and exports,”indicated Therese Turner-Jones, IDB General Manager of the Caribbean Country Department.
Turner-Jones added that “the government has shown a strong and continued commitment to enhanced Fiscal Responsibility Framework rules.”
This third and final phase of the program will also support government efforts to tackle a reform of the National Insurance Scheme and promote the institutional strengthening of the Tax Administration Jamaica and of the Jamaica Customs Agency.
