JAMAICA: Bankers unhappy with new tax system

• by IPS Correspondents (kingston)
• Thursday, November 24, 1994
• Inter Press Service

KINGSTON, Nov 24 (IPS) - Government's decision to slap an additional 23 percent levy on financial institutions to help pay the public sector wage bill has not gone down well with bankers and some economists here.

"There is something wrong with our environment when successful sectors are arbitrarily taxed to cover a gap in the government budget," says Workers Bank chief executive officer, Delroy Lindsay. "The bank levy is not consistent with (government's) overall policy," he added.

"Brazen" is how Mark Rickets, an economist, described the move.

Managing Director of Mutual Security Bank, Douglas Folkes, says he does not understand why the banks are being singled out by government for such unfair treatment.

Minister of Finance, Omar Davies late Wednesday told the House of Representatives that the government will be imposing a new levy on financial institutions, to finance the gap which has resulted from wage settlements in the public sector.

The need to fund public sector wage increases comes in wake of the fact that wage demands from this group have exceeded the government wage fund, which was initially set at nine percent, then hiked to 12.5 percent

The government has already agreed that two bodies -- police and teachers -- are to get more than the 12.5 percent. Teachers are therefore to be paid an increase of 16 percent in one year and 14 percent in the second year. The police have settled at 15 percent in one year and 14 percent in the second.

The settlement with these two groups, Davies says, has already exceeded the wage fund provided by the government for the 1994/95 period.

Other public sector entities, although demanding huge increases ranging from 80 to 300 percent per year are not going to get more than the teachers, the government has promised.

To deal with these increases, Davies says, the government had to undertake a review of its income or identify new funds.

"The new tax covers a four-month period, coming into effect on December 1, 1994 and ending on March 31, 1995," Davies said.

The rate of levy is 23 percent of net profits and is expected to yield an intake of 15 million dollars for the rest of the financial year. This is in addition to taxes already paid by banks on their operations.

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