Minister of Finance and Public Service Audley Shaw says the Government will not accept the proposals made by the Opposition to reduce the national Budget.

Among the suggestions is an increase in the tax on interests on government bonds from 25 per cent to 33 per cent, first made by the People's National Party Youth Organisation (PNPYO) and endorsed by Opposition Leader Portia Simpson Miller and her spokesman on finance, Dr Omar Davies.

The move, Davies has said, could net up to $8 billion and reduce the need for an $8.75 special-consumption tax on fuel.

However, speaking at Mayberry Investment's monthly forum last Thursday, the minister said such a move would affect the pensioners as well as ordinary Jamaicans "who have savings wrapped up in government paper".

"We cannot, in this fragile environment that we are now operating, be changing the rules, midstream, on those who are expecting a certain level of returns."

Such an act could result in shareholders investing in bonds in other countries, which could lead to capital flight in Jamaica, the finance minister argued.

Right direction

According to Shaw, the country is going in the right direction as talks with the private sector to begin a phased reduction of the interest rates are paying off.

"The short term on instruments is now 19.8 per cent, we cannot be erratic; we cannot reach 12 per cent overnight."

Responding to Davies's criticism that the differential between the interest and inflation rate is due to a lack of confidence in the Government, Shaw argued that if this was the case the imposition of additional taxes on our bond holders would not assist.

The minister attributed the suggestions from Damion Crawford, head of the PNPYO, to youthful exuberance, but chastised Simpson Miller and Davies - both of whom, he said, were aware of the reality of the situation, for supporting the ideas.

Among the suggestions made by the PNPYO is a charge of 15 per cent tax on dividends, collecting the outstanding $8 billion in GCT, increasing all sin taxes, and signing a memorandum of understanding with hotels whereby only those that consume 60 per cent of their total purchases in Jamaican products can receive the half GCT waiver, which could generate a total of $19.3 billion.

mark.titus@gleanerjm.com