PNP cites Budget reprioritisation to cover tax-free threshold raise

The proposal by the main opposition People’s National Party (PNP) to raise the tax-free ceiling for personal income tax to $3.5 million annually would be implemented in the next fiscal year, though it would forego approximately $55 billion in revenues, a top PNP official has disclosed.

Julian Robinson, opposition spokesman on finance, also pledged that the PNP, if elected to form the government after the September 3 general election, has “no intention of imposing any new taxes to fund the commitments that we have made”.

But the PNP’s timeline for the implementation of the new personal income tax threshold may not be realistic, especially in light of the party’s commitment that it would not be funded by new tax measures, one economist has opined.

The challenge for the PNP, according to economist Keenan Falconer, is how to accommodate that magnitude of expenditure immediately, “and that might require a phased approach over a longer period of time than to pursue that immediately in the next two coming fiscal years”.

“I don’t anticipate that it can start until two years’ time, and may not end until two or three years after that,” Falconer told The Gleaner yesterday.

The proposed increase in the personal income tax threshold is the centrepiece of PNP’s ‘The People’s Guide to a Better Life’, which the party unveiled during a press conference on Monday.

The document is an addendum to the party’s ‘Mission Jamaica Love’ manifesto, which was published two weeks ago.

In March this year, the Government announced that the personal income tax threshold would be increased to $2 million over a three-year period, moving first to $1.8 million, then to $1.9 million.

Although raising the threshold to $3.5 million would forego $55 billion in revenues, Robinson insisted that it can be funded through “organic revenue growth” and existing pockets in the $1.3-trillion national Budget.

As an example, he said it is anticipated that the savings derived by households from the new personal income tax threshold would generate approximately $5 billion in revenues from new activities.

“We anticipate, based on the way we have structured this, which means that persons at the lower end would have more relief, some of that money is going to go back into consumption, which would increase GCT (General Consumption Tax) and other applicable taxes,” Robinson told The Gleaner.

Further, Robinson pointed to the Government’s projection of a $140-billion growth in revenues over the next three fiscal years.

This figure is based on an economic growth rate of one per cent, he said, citing the fiscal policy paper that was published alongside the Budget which was approved by Parliament in March this year.

“But we intend to grow the economy by more than one per cent.”

The opposition spokesman on finance noted, too, that the current Budget has allocations totalling $360 billion for government programmes.

“Our programmes and priorities are different from the JLP’s (Jamaica Labour Party) programmes and priorities, and as such, we are going to place the things that we consider to be critical to improving the quality of life of all Jamaicans at the forefront of our priorities,” he said.

“So, between the organic revenue growth and the existing envelope that exists in the Budget. our commitments can be funded.”

Falconer believes this approach could be the only feasible option to execute this policy proposal.

“I anticipate that it would require some amount of re-prioritisation of expenditure, because both the PNP and the JLP have committed to not levying, or imposing, new taxes,” the economist reasoned.

Robinson noted that the new fiscal year starts on April 1 next year and insisted that the commitments made by the PNP, “certainly in relation to the tax threshold, would commence at that time”.

“We may make adjustments and we may have to do supplementary budgets in terms of how you move expenditure within the current band, as has been done in the past,” he cautioned.

livern.barrett@gleanerjm.com