No increase in Income Tax threshold at this time
As anticipated, Finance Minister and the Public Service Minister Dr Nigel Clarke opened the 2023-2024 Budget Debate in the House of Representatives yesterday (March 7) announcing that it will be another ‘no new tax’ package for this financial year.
This, he boasted, marks the sixth ‘no new tax’ package being presented by the Andrew Holness administration and the eighth budget, where there will be no net new taxes being levied.
Clarke argued that this move is reflective of the fact that the Government is sharing the gains being made by the country on the economic front with its people and will continue doing so.
According to the finance minister, “because of the prudent policies of the Government, we were not only able to survive but, like only a handful of countries around the world, we have thrived. Economic growth has returned to pre-pandemic levels with the debt also returning to pre-pandemic levels… . Jamaica is poised in becoming a break-out country… ”.
No to income tax threshold increase
Regarding calls for an increase in the income tax threshold, to bring parity to some public sector workers, whose new compensation would see their tax liability becoming uneven with their counterparts in other areas of the government service, the finance ministers response was a strident ‘no’. He acknowledged that there may be cases like these, arguing this is not an overwhelming majority.
In this respect, Clarke conceded that overtones have been made for a further increase in the income tax threshold to bring back those public sector workers with the new compensation regime falling in this bracket to bring them back to level terms.
Clarke is adamant that increasing the income tax threshold cannot be done at this time, saying the government just cannot afford it.
“But, you can be assured that when the time comes, we will be the first to do it; not to talk about it, but to do it,” Clarke declared to desk thumping from the Government side of the aisle.
The last time the income tax threshold was increased was on April 1, 2017 when it was increased from $1 million to $1.5 million.
Impassioned plea to sign
The finance minister sought to make out a case for trimming from 325 to 16, the salary scales within the public sector while making an impassioned plea for the police, teachers, doctors and other groups, which have not yet signed on to the new salary scale, to do so with haste.
Clarke bellowed that such a comprehensive restructuring of the salary scales within the public sector has never taken place before.
He stated that, in the new restructure, the salary increase being offered to public sector workers will exceed in a year what many would have received over the past 10 years combined.
Clarke told the Parliament that the Government currently has in the Consolidated Fund $30 billion to be paid out to the police, teachers, doctors and other groups that have not yet signed on to the new compensation package.
“We have allocated $10.2 billion for rank and file police officers with an additional $1 billion for district constables and $600 million for members of the Police Officers Association, totaling $11.8 billion that is ready to go,” the minister said.
“We want members of the police force to receive these payments in March 2023.
“The total amount we have for the teachers is approximately $12 billion, that is ready to go. We want the teachers to receive these payments in March 2023.
“The total amount we have for the junior doctors is $6.4 billion. We want the doctors to receive these payments in March 2023. We want to be in a position for these amounts to leave the Consolidated Fund in March 2023.”
He advised that $79.4 billion is provided for in 2022/23 to pay the incremental amounts required to increase central government public sector salaries to the amount targeted for the first year of the restructured salaries. He emphasised that, if these amounts remain unpaid over the next few weeks, meeting the fiscal balance targets required under law does not leave room to accommodate these amounts in the next fiscal year, as the Government already has a full trillion dollars of expenditure programmed for next year, inclusive of the second-year payments under the public sector compensation restructuring.
For Clarke, “the space does not exist for the Government to pay both the first year restructured salaries and the second year restructured salaries at the same time”.
He said: “As such, for fiscal sustainability, we will have no choice but to pay these amounts over several years commencing in financial year 2024/25.”