The Editor, Sir:

EARLIER THIS year during the Budget Debate, Minister of Finance and the Public Service, Audley Shaw, signaled his intention to abolish the tax-free gratuity incentive to the tourism sector. This incentive, in effect for the last 17 years, was first tabled on December 17, 1991 by the then Minister of Finance the Hon P.J. Patterson.

On laying the bill in Parliament, Mr Patterson stated, "In this sector (tourism) the quality of service is measured in terms of courtesy and friendliness." He went on to say, "it is essential, therefore, that we provide incentives to our workers who play such a pivotal role in the success of this vital industry."

At that time tips and gratuities earned by workers were subject to income tax. By virtue of this amendment, as of January 1, 1992, all schemes operated by hotels, guest houses and other tourism related establishments would benefit from a relief of income tax.

This was a visionary move in 1992 and showed an early recognition of the importance of tourism. It was also deemed necessary as Jamaica had a high percentage of all-inclusive resorts which did not allow tipping.

gratuity

This was the situation until 2003 when it was amended by then Minister of Finance Omar Davies, who placed a cap of $250,000 on the amount of gratuity that could be claimed and further stipulated that the incentive would not apply to employees with salaries in excess of $500,000 per annum.

The tax-free gratuity is a major incentive to employees in the industry especially those at the bottom of the pay scale. It allows workers, earning less than $500,000 a tax free allowance on $250,000 of their take-home pay. The finance minister is now about to do away with that. Jump high or jump low, this means that these tourism workers will now have to pay $62,500 more tax each year on their emoluments.

In presenting his Budget, Minister Shaw raised the general tax threshold from $220,000 to tourism workers to whom the gratuity incentive applied, however, will not benefit from this as the increase will be offset by them losing their tax-free gratuity allowance.

Taking all things into consideration, it is my position that the minister should reconsider his position of abolishing the tax incentive on gratuity schemes for the following reasons.

pay scale

First, the incentive only applies to workers at the bottom of the pay scale, those who earn below $500,000 per annum and are most affected by these difficult financial times and the recently imposed tax measures.

Second, as time passes more and more persons will exceed the $500,000 threshold and, therefore, will no longer qualify for the incentive, thereby decreasing the cost to the Government.

Third, there is still a need in the sector for an incentive that encourages, as Mr Patterson said, courtesy and friendliness. After all, if the workers were receiving tips they would put them straight into their pockets and not pay taxes on them anyway.

No matter what, there is a need for a fulsome discussion on this matter. It is one of a number of measures imposed in the recent Budget that will have a profound effect on the sector and its workers, and their interests must be protected.

I am hoping Minister Shaw will be gracious to the industry and reconsider his decision.

I am, etc.,

Dr Wykeham McNeill MP

Opposition Spokesman,

Tourism