Viralee Latibeaudiere, director general of the Tax Administration Services Department. - File

Its unpopularity notwithstanding, the skewing of Jamaica's revenue system towards more direct forms of taxes has helped to reduce the fallout from the current economic downturn, tax officials have said.

The buffer created by direct taxation, according to Viralee Lati-beaudiere, director general of the Tax Administration Services Department, is validated by a recent Organisation for Economic Cooperation and Development (OECD) report.

That report, she said, shows that countries which rely heavily on indirect taxation were experiencing more severe fallout in revenues than countries with a direct tax system.

"Recently, from a study, we found out that countries that rely mainly on the GCT (General Consumption Tax) had a far greater fallout in their revenues," the tax official told a Gleaner Editors' Forum.

"So you find that countries like Canada, Mexico, the United States, are showing fallout in revenues of 17 to 20 per cent over the last two quarters where the Caribbean and Latin American fallout in revenue is between 10 and 11 per cent," she said.

Latibeaudiere said the trend was similar in Jamaica, where the current revenue decline is greater from more indirect GCT with a relatively small reduction in collections from direct taxes such as the Pay As You Earn (PAYE) income tax.

Latibeaudiere said, in the Jamaican situation, there has been 13 per cent or $3-billion decline in GCT collections over the period April to September this year. In contrast, PAYE taxes, only reflected a one per cent or $400-million drop.

One per cent decline

The revenue department has also reported that direct company taxes were showing a one per cent or $95-million decline over the period, whereas individual taxes were showing a 49 per cent or $1-billion fall.

"So, in the Caribbean and the Latin America, we have feared out far better than the more developed countries, they are struggling now to come up with measures (to address the fallout)," Latibeaudiere said.

"So, you find that for Customs, the fallout is greater than what is happening at Inland Revenue because the statistics proved this to be so. GCT and SCT (Special Consumption Tax) are much more vulnerable to economic downturn than the income tax," she explained.

Over the years there have been calls from some sections of the society for an overhaul of the country's tax system and a general move towards a more indirect system.

The arguments have included claims that such a system would be more equitable and would capture more taxpayers.

No major impact

Meantime, tax department officials said, so far, there has been no evidence of a major impact on revenues from the loss in 30,000 jobs since last year, as reported by the labour ministry.

The prime minister, on the weekend, said the cuts had now reached 40,000.

Ainsley Powell, commissioner at the Taxpayer Audit and Assessment Department said the impact, if there were any, would not be reflected in revenue intake in this financial year.

Powell said jobs losses would only impact revenues if those who were made redundant were receiving salaries above the tax threshold.

In July, the non-taxable annual income moved from $220,000 to $320,736. Another adjustment will be made on January 1 to bring the threshold to $440,000.

dionne.rose@gleanerjm.com