(Jamaica Gleaner) – Prime Minister Bruce Golding dramatically changed course on Wednesday night as he roundly rescinded the General Consumption Tax (GCT) on a list of items announced by Finance Minister Audley Shaw a week ago.
In a national broadcast, following howls of protests, Golding announced that all items that were exempt from GCT prior to Shaw’s announcement last week will retain that status, with the exception of electricity.
In a bid to recoup some of the losses incurred by the Government’s reversal, the prime minister unveiled plans to hit businesses with a five per cent advanced GCT payment on taxable goods.
He also disclosed that the higher income earners will be be called on to bear more of the tax load.
Golding said the personal income tax rate will be increased to 27.5 per cent on all income above the threshold for persons earning in excess of $5 million, and 35 per cent for persons earning in excess of $10 million.
The prime minister said this was a temporary measure and would apply from January 1, 2010 to March 31, 2011 and is expected to yield an additional $1.3 billion.
The complete list of exempted items, including basic foods, sanitary napkins and white canes for the visually impaired, is expected to be released today by the finance ministry.
Even the shock treatment to electricity consumers has been somewhat eased.
The initially announced 17.5 per cent GCT on electricity that exceeds 200 kWh for residential customers has been reduced to 10 per cent.
The prime minister said this was originally expected to yield $1.2 billion, but has now been slashed to $711 million.
The prime minister announced that 10 per cent GCT will also be applied to electricity for commercial and industrial customers.
He said this should not have any significant impact on businesses which are GCT-compliant, since they will be able to deduct it from their monthly GCT returns and should not result in increased prices.
“It is those who are not filing GCT returns who will now have to pay something through the 10 per cent GCT that they will now be charged on electricity,” he said.
The prime minister revealed that this is expected to yield $742 million.
Golding said government accounts such as government offices, government agencies, schools, hospitals and clinics will be exempt.
He revealed that a special waiver will be provided for private hospitals and schools that are exempt from GCT and would not be able to claim it back.
Golding said the ad valorem tax of 15 per cent on petroleum will remain as announced.
This is expected to yield $9.4 billion.
The prime minister emphasised that the increase in the GCT rate to 17.5 per cent will remain as announced and is expected to yield $3.6 billion.
Additionally, he said, the increase in the Special Consumption Tax on cigarettes will remain as announced to yield $1.4 billion.
Golding said the tourism sector currently enjoys a special 50 per cent GCT rate, which will be fixed at 10 per cent as of April 1, 2010.
This is expected to yield $1.2 billion.
He said the government will be going after the approximately one-third of businesses which should be paying GCT and are not doing so.
Accordingly, the prime minister announced a five per cent Advanced GCT Payment on all taxable goods imported.
“Those importers who file their GCT returns will be able to deduct it from their GCT payments so it will have no impact on them or the prices they charge,” Golding explained.
However, he said those who do not file their GCT returns will be forced to make a contribution to the dwindling revenues.
He said this measure is expected to yield $2.9 billion.
Golding disclosed that the Advanced GCT Payment will not apply to petroleum and capital goods, manufacturers who already enjoy deferment of GCT payments, goods that are zero-rated or exempt from GCT, or ICIs who now pay an uplift charge in lieu of GCT.
