Mr. Shaw, opening the 2016/17 Budget Debate in Parliament yesterday, Shaw announced just over $13 billion in additional taxes to make up for the $12.65 billion the government will give up with the raising of the income tax threshold from $592,800 to $1 million come July 1.
He announced a special consumption tax on petrol of $7.00 per litre, with an expected yield of $6.489 billion for the remainder of the fiscal year.
“Knowing that the gas tax that we thought was there isn’t there, and fully realizing the urgency and the need out of the enlightened anticipation for the $1.5 million we decided that we simply must find the $12.5 billion to fund this [income tax] package,” Shaw told the House.
“We are increasing the specific consumption tax on cigarette from $12 per stick to $14 per stick effective May 13, 2016,” Shaw said adding that the tax would garner $574 million for the remainder of the fiscal year.
“At present a stick of cigarette costs $40 and let me send the signal now, there is no need for it to go beyond $45 dollars if $2 is added in taxes because we know the tendency out there in the market,” the finance minister cautioned.
Shaw said his administration is also introducing a special consumption tax regime for liquid natural gas and revising the regime for heavy fuel oil, effective May 13, with expected revenue of $1.415 billion for this fiscal year.
Departure tax will now be moved from US$20 dollars to US$35 and is projected to add $5.3 billion to help offset the revenue lost in the tax break.
All income earners under Jamaica's PAYE income tax system will receive income tax relief of $1.5 million, to be implemented in two tranches. He explained that the new regime will start with a new income tax threshold of one million in July, to be increased to $1.5 million on April 1, 2017.
The Jamaica Labour Party, while in opposition, had promised to provide the income tax relief to persons earning $1.5 million and less, but after coming to office, consequent on winning the February 25 general election, and engaging in a series of consultations, the decision was made to extend the relief to all income earners under the PAYE system, Mr. Shaw said.
As a result of this change, 251,000 people will benefit from the increased income tax threshold, up from the 118,000 originally projected.
The Finance Minister also announced that the income tax rate of 25% will be increased to 30% for those earning $6 million and more.
In order to finance the new income tax relief, he also announced several additional revenue measures.