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Local News>IMF team conducting tax incentive reviewSabrina N. Gordon - Business Reporter |
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A team of consultants paid for by the International Monetary Fund is in Jamaica to do a review of the tax incentive system that the finance ministry is undertaking as part of reforms being overseen by Senator Don Wehby.
"The three consultants arrived in the island this morning (Thursday), and I have already met with them," he told the Financial Gleaner later in the day.
The three are expected to wrap up their work in two weeks, after which a report goes to Cabinet.
First Mentioned
The Senator first mentioned the study of the tax incentives Wednesday at a seminar hosted by the Institute of Chartered Accountants of Jamaica..
"The study is expected to inform a more efficient process going forward," said Wehby, the minister without portfolio in the Ministry of Finance and the Public Service.
It will review the incentives that exist in the various sectors and determine whether they should be modified, eliminated or switched.
Hoteliers - who get a 10-year tax holiday for investing in properties - are, said Wehby, the major beneficiaries of incentives, adding that it was based on discussions with the group that Jamaica reached out for external help to complete the review.
The group has said that more competitive incentives are needed.
"We don't know if this is so or not so, the best way to determine is to do a comprehensive study with external assistance," said Wehby.
Government incentives which started in the 1950s and 1960s to drive investment and economic growth are given across a number of sectors including the manufacturing and hotel industry.
"The concept of giving incentives is to drive economic growth, and the platform of the Government is to enhance growth," said Wehby Thursday.
"Behind this background the government is conducting a review of the tax incentives given as the economy has not been growing."
Incentives Too General
Fiscal conservatives have said that the current system has become unwieldy; that the incentives are too general, and is costing government in revenues foregone.
The IMF is already on record warning the new Bruce Golding administration that it could be a mistake to use incentives as a hook for foreign investments, saying it could create pressure on the fiscal accounts.
The current review will test concerns, and is expected, where needed, to tighten up the existing regime.
Said Wehby: "The study is being done to determine if the incentives are really driving economic growth, and modify them to achieve this."
Wehby said the finance ministry decided on a comprehensive review to quantify the costs associated with the current system, and the macroeconomic impact from the revenue forgone on the public debt and growth.
This he believes will allow for clearer definition of a cost-effective policy and achievable benefits in terms of investment, production, employment, exports and foreign exchange earnings.
sabrina.gordon@gleanerjm.com