Susan Gordon, Staff Reporter

The finance Ministry continues to flirt with the idea of merging payroll taxes, and is awaiting the results of a new study to make a final determination.

But Earl Samuels, mana-ging director of the National Housing Trust (NHT) sees problems ahead and is already expressing concern that his agency could see an interruption in its normal flow of funds if housing contributions are married to other statutory taxes.

The NHT, whose total assets reached $80 billion in June, and had unaudited net assets of $43.3 billion, finances its own housing projects, as well as lends to developers and homeowners.

This year, the NHT has budgeted capital expenditure of just under $9.4 billion.

Annual contributions to the trust, used to build the housing fund, are projected at $8.7 billion this fiscal year.

Last week, the Finance Ministry told the Financial Gleaner it was just now assessing the feasibility of combining payroll taxes, with other sources advising that the study was being sponsored by the Inter-American Development Bank.

Revenue collection

The idea behind consolidation is to lessen the cost of administering revenue collection for government, and encourage greater compliance by companies who would only have one tax to figure into payrolls, instead of the current four - education, HEART Trust, NHT and NIS.

Tax complaince for NIS is 60 per cent, but NHT was not sure of its rate though it suspects there are about 22,000 employers.

"We do not have a figure for the entire employer population so it is difficult to state what percentage of employers is now contributing," said the agency.

"We are working to arrive at such a figure."

This week, though tax expert Ethlyn Norton-Coke endorsed the plan as a cost-saver and beneficial to businesses - Norton-Coke was a member of the Matalon Tax Committee - some company financial officers said there was little to gain.

"Assuming that applicable rates do not change the process of administering and the charges remain the same, we do not expect any significant savings from the merger," said Chief Financial Controller at Red Stripe, Donna Doran.

Doran was also concerned that the merger would result in an increase in NIS rates.

Another beverage company said if there was anything to gain, it would be in cost savings in deploying its messengers.

"It would save us the cost of sending one bearer instead of two, but this wouldn't even amount to $4,000 for the year," said the accountant.

The chief accountant at a stevedoring company said for them it would mean writing one cheque instead of two.

Both accountants requested anonymity.

Finance minister Dr Omar Davies signalled the tax merger was likely to go-ahead when he mentioned the planned policy shift in his report to Parliament in April 2006 in the Jamaica Public Bodies report, consequent on the recommendation of the Matalon Tax Committee that NHT and National Insurance Scheme contributions be combined, and the HEART and education taxes eliminated.

Samuels is not against the merger, saying it is likely to be of "tremendous advantage" to businesses, but wants an assurance that NHT contributions will be extricated swiftly from the pool and paid over to the Trust, whose funds are normally filed directly to the agency bypassing the Consolidated Fund.

"In terms of compliance, it has tremendous advantages. The businessman ends up being hounded by four different bodies pursuing its statutory stake with the present system," he said of the present system.

"My only concern is that there would be no delay in NHT contributions being flowed to NHT."

The rates of compliance with regards to employers paying up their statutory payments at NHT and NIS are approximately are x% and 60 per cent respectively.

Employers are required to pay the first $12,500 earned per annum on employee's salaries of $500,000 or more for NIS. Last year, NIS contributions amounted to $4.9 billion, $973 million of which was allocated to the National Insurance Fund.

NHT requires that employers pay over two per cent of employees' gross salary on a monthly basis after NIS is deducted, and 3 per cent from company operations.

The Matalon Tax Policy Review Committee had recommended that the two taxes be rolled into one, and for income tax to be harmonised with income tax at 25 per cent.

"The tax base of both programmes (NHT, NIS) would be expanded by broadening the income tax base, and could be significantly expanded by administrative efforts to increase the rate of compliance," said the committee's November 2004 final report.

Norton-Coke, Director of Tax Services at Deloitte and Touche, told the Financial Gleaner, the study to combine the taxes was in the early stages, adding that it would also review the Pay as You Earn (PAYE) system.

"It's a very good project. I'm in total agreement with it," said the tax attorney. "Everything will be easier to pay."

The finance ministry did not respond to queries on which taxes were under review, nor how the revenue collections might be handled after consolidation.

Joseph M Matalon, who chaired the tax policy committee, said last week he was unaware of the specific plans, but thought the NHT was adequately resourced as the point of collection.

Under the present system, PAYE, education tax, HEART Trust and NIS contributions are filed at the Inland Revenue Board while NHT is paid at the Trust's offices.