(Jamaica Observer) Jamaica’s taxation levels are higher than most of its developing nation peers, according to a new study by UHY, an international accountancy network.
It comes on the heels of another multi-billion dollar tax package set to balance the books of the Government.
The island, however, falls below the global average when factoring other countries, including Scandinavia which taxes heavily to provide a welfare state.
The study entitled Tax as a Percentage of Gross Domestic Product (GDP) examined 53 economies around the world, calculating the percentage of a country’s GDP taken by the Government in tax. In Jamaica’s case that equates to nearly one-quarter of GDP. While the lower income markets average 15.1 per cent with the global average at 27.8 per cent.
Relatively competitive
“While Jamaica’s tax take is higher than the average of the 15.1 per cent across the lower income emerging economies, at 23.9 per cent we are relatively competitive,” noted Dawkins Brown, managing partner of UHY Dawgen in Jamaica, when commenting on the study released this week. UHY Dawgen operates five locations in the island and is a member of the international network at UHY.
Among the countries in the study, Denmark offered the highest tax take as a percentage of GDP at 48.6 per cent while Nigeria offered the lowest at 1.6 per cent. The study reasoned that Western European countries are “inhibiting” their economies with tax burdens at least 40 per cent, which are heavier than both the global average and the average for neighbouring countries in Central and Eastern Europe. The study indicated that the US offered a tax take of 25.4 per cent, China the world’s second largest economy at 21 per cent and Japan the third largest economy at 29.5 per cent.
The Jamaican economy has languished with low rates of growth for much of 40 years. Government has utilised increased taxation as a means to finance its budget.
“As the economy recovers and grow we hope the Government will make taxation a policy to drive economic growth,” Brown hopes.
The Government of Jamaica introduced $10.38 billion worth of new taxes in March as part of revenue measures for its 2015/16 budget. The largest measures included the increase in the special SCT rates on petrol by $7.00 a litre expected to gain $6.4 billion annually; the replacement of the 1.0 per cent petrol cess to a special SCT of $2 a litre expected to gain $1.8 billion; the reintroduction of GCT on electricity for residential customers expected to gain $807 million; an environmental levy that introduced 0.5 per cent tax on domestic sales excluding the services sector expected to gain $962 million; and the rationalisation of outdated trade and business licences expected to gain $500 million.