THE CARIBBEAN Policy and Research Institute (CaPRI) says the measures announced by the Government to finance the 2009/2010 budget are a step in the right direction.

According to CaPRI, the government's move to apply indirect taxes is a better measure that is equitable and will capture more of the population.

Minister of Finance and the Public Service, Audley Shaw announced Thursday that the Government would increase the special consumption tax on gas by $8.75 per litre as one of the measures to bring more money into the Government's coffers in the face of the tough financial year ahead.

Threshold increase

"The increase in the income tax threshold demonstrates the Government's recognition of the plight of the most vulnerable in our society in this crisis," the institute adds, commending the announcement of the doubling of the income tax threshold from $220,000 to $440,000.

The threshold increase will take effect in two stages. The first adjustment to the threshold will be effective July 1, moving the non-taxable annual income to $320,736. The second adjustment will be made on January 1 to bring the threshold to $440,000.

"The lower end of the PAYE spectrum, while subject now to increased indirect taxes, is now exempt from onerous direct taxes such as income tax," CaPRI says.

Social safety

CaPRI also welcomes the Government's efforts to widen the social safety programmes including expanding the PATH programme to capture a further 120,000.

"CaPRI commend(s) the Government's initiative to increase the income tax threshold of the nation's pensioners. Moreover, the constituency development fund remains constant at $2.4 billion, as part of the Government's social safety net," it adds.

The institute says Shaw's presentation is a good start to the reform of the island's tax system.

"The Government's attempt to alleviate the pressure on the society's most vulnerable, even in the midst of crisis, is also commendable. CaPRI looks forward to the Prime Minister's presentation."