Jamaica and Backward Revenue thinking
I had to speak from an informed perspective on this topical budgetary issue of the Bank Withdrawal and transactions Tax to be implemented in Jamaica in June of this year.
The 2014-2015 revenue measures see article 3 being a levy on withdrawals from deposit taking institutions The levy is chargeable on all withdrawals(ABM/ATM/ETM) , e-banking, Point of Sale, Cheques and internet transfer. The rate varies from 0.1% on transactions under $JA 1 million, to 0.05% for transactions above $JA 20 million.
Although the measure seems to be draconian, that is really not the issue. The principle of taxing the banking sector for short falls in government revenue is a backward move towards financial repression. Financial repression refers to governments taking control over the domestic financial market.
Secondly, Jamaicans are not concerned with the other financial institution measures that will affect them along with the levy on withdrawals. These are an 11% increase in asset tax (i.e. less interest income on investment), 2.5% increase in premium tax for Life Assurance companies and well as a 5% increase in investment tax for insurance companies, these together will see Jamaicans having to pay more for all classifications of insurance premiums.
So a tax on withdrawals may not be so bad, if you still have pay more for insurance as well as get less money when you invest.
These revenue measures (some good) will attain the income needed to close the gap in budget but at what cost, the cost of potential investment for both locals and foreigners and people moving away from the financial sector and forming an informal financial sector.
The 2014-2015 revenue measures see article 3 being a levy on withdrawals from deposit taking institutions The levy is chargeable on all withdrawals(ABM/ATM/ETM) , e-banking, Point of Sale, Cheques and internet transfer. The rate varies from 0.1% on transactions under $JA 1 million, to 0.05% for transactions above $JA 20 million.
Although the measure seems to be draconian, that is really not the issue. The principle of taxing the banking sector for short falls in government revenue is a backward move towards financial repression. Financial repression refers to governments taking control over the domestic financial market.
Secondly, Jamaicans are not concerned with the other financial institution measures that will affect them along with the levy on withdrawals. These are an 11% increase in asset tax (i.e. less interest income on investment), 2.5% increase in premium tax for Life Assurance companies and well as a 5% increase in investment tax for insurance companies, these together will see Jamaicans having to pay more for all classifications of insurance premiums.
So a tax on withdrawals may not be so bad, if you still have pay more for insurance as well as get less money when you invest.
These revenue measures (some good) will attain the income needed to close the gap in budget but at what cost, the cost of potential investment for both locals and foreigners and people moving away from the financial sector and forming an informal financial sector.
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