Dionne Rose, Business Reporter

Kavan Gayle, BITU president

Finance Minister Audley Shaw's two-tiered proposal, which hikes the income tax threshold above $200,000, has fallen short of worker expectations, according to the island's two largest labour unions.

The National Workers' Union (NWU) said it hoped the new threshold would be $275,000, in line with the recommendation made four years ago by the Matalon Tax Committee.

Instead, Shaw has proposed that the level of tax-free income be increased initially by 3.5 per cent to $200,304 as of July 1, 2008, and that the threshold be further adjusted to $220,272 on January 1, 2009.

Disappointed

"We are disappointed," said Vincent Morrison, president of the NWU.

The current threshold is $193,440, which would put the overall increase at 13.9 per cent, six points below inflation.

Inflation for the fiscal year ending March was recorded at 19.9 per cent - 5.2 per cent of which was recorded over the past three months - the Statistical Institute of Jamaica has reported, pushed largely by high food prices.

Shaw, in documents filed last week, is projecting for 10 per cent inflation this fiscal year and single digits in the periods after.

Morrison said with the rising food prices worldwide, workers' dis-posable income has been eroded.

In addition, the threshold amounts to under $4,300 weekly, which means that one category of minimum-wage earners, security guards, whose earnings are at a $5,500 floor, is subject to income tax on the differential.

The Matalon Committee, whose recommendation was for tax-free income of $275,184 or $5,292 per week to start, had also suggested that it be indexed to inflation, which would see the threshold moving at the same level as prices.

That hedge, the report said, would provide total income tax relief to about 98,000 taxpayers, but would cost the Government $5.5 billion.

Former finance minister Dr Omar Davies, who had accepted the recommendation, also promised to implement it in three phases.

Adjustments

Vincent Morrison, NWU president. - File photos

The first adjustment, in July 2005, scrubbed 54,600 persons from the income tax list, while the second dropped another 12,100.

But Davies did not make the third adjustment, citing fiscal pressures.

Still, Morrison and Bustamante Industrial Trade Union's (BITU) Gayle, say they were hopeful that the new government would have followed through.

"We were hoping that it (the increases) would have been a little bit more, but pleased that it would be adjusted every year, which is commendable," said Kavan Gayle, president of the BITU.

But unlike Morrison, he had no specific figure in mind.

"We never really quantified it," he told Wednesday Business.

Shaw said the increases in the threshold would cost the Government $575 million.

dionne.rose@gleanerjm.com