As is already known, total expenditure for 1998/99, as tabled in the Estimates of Expenditure is $130 billion. This expenditure will be financed through tax revenue, non-tax revenue, capital revenue, transfer from the Capital Development Fund, grants, project loans as well as domestic borrowing, totalling $111 billion. The contribution of each of those listed above will be provided in a Ministry Paper accompanying my presentation.

That leaves an amount of just under $19 billion to be funded by a combination of external market loans, user fees and tax measures.

As regards the external market loans, the intention is to raise a sum of US$400 million from the private capital markets. This follows on our initial efforts last year in which we raised US$200 million although the bond offer was massively oversubscribed. Our original plan was to return to the market for an additional US$100 million but that plan, as the country is aware, was aborted given the crisis in South East Asia and resulting problems in the international capital market.

Our return to the international capital market will be greatly facilitated by the recent rating of Ba3 accorded to the Jamaica bond by Moody's Investor Services, a rating. The Government undertook this rating at a time when Moody's was downgrading former stellar performers in the light of South East Asian crises.

The country should be made aware that once an agreement has been reached to proceed with a rating exercise, Moody's, unlike other rating agencies, will proceed to publish its assessment, regardless of whether or not it represents pleasant news to the country being reviewed. It is also important to note that virtually the whole investor community in the financial capitals has applauded the assessment by Moody's indicating that the Jamaica bond placed us on par with a country such as Argentina and ahead of a country such as Brazil.

We must lament the fact that, for whatever reasons, there were those who sought to denigrate this rating, asserting that it was much ado about nothing. I have no doubt that if it had been negative it would have been used as an indication of the failure of government policy. One critic even posed the question-what would you expect given that the Government paid Moody's to do the rating?

The nonsensical nature of such a comment is exposed by the fact that if we follow that line of reason it is clear that Korea and Japan obviously did not pay Moody's enough to prevent their bonds being downgraded.

The fact is that the rating is a major achievement, not for the Administration but for the country of Jamaica. Let me close on the topic by reading into the record a letter to me from Mr Hugo Verdergaal, the Managing Director of the Global Markets Division of

Citibank, soon to be the Citicorp:

"Dear Minister:

I would like to extend Citibank's congratulations to the Government of Jamaica upon receiving the BA-3 credit rating from Moody's Investment Services. The rating places Jamaica at the level of such countries as Argentina and is in part a result of the clear economic direction set by Government through the strong monetary, fiscal and national industrial policies initiated several years ago.

The successful syndication of our US $100 million loan under very difficult Asian market conditions, confirms the confidence in the country by the broader investor community.

Again, congratulations to the Government team responsible for this achievement."

We have no doubt that with this support from the private capital markets we will be able to raise the US$400 million which we have anticipated to finance the budget.

Compliance

It is well established that the tax base in Jamaica is unduly narrow as a significant portion of the revenues which are due is not being collected. Successive Administrations have continued a process toward improving the nature of the system as well as to make it more equitable in terms of sharing the burden. The process continues in the form of the TAYARP project.

The critical aspect is to strengthen the organization of tax administration. This process is far advanced and a critical aspect is the reorganization of the departments along functional lines.

Shortly, there will be six departments:

• A Tax Audit and Assessment Department, which will assume all responsibilities related to reviewing, examining or investigating tax returns, submissions and declarations;
• An Inland Revenue Department, to be in charge of all collection functions;
• A Taxpayer Appeals Department, to deal with appeals and to encourage resolution before court actions are pursued;
• A Tax Administration Services Department, which will provide centralized administrative services for the other departments;
• A Revenue Protection Department; and,
• A Customs Department.

Legislation to provide for the restructuring in line with the above has been prepared and will shortly be presented to Parliament.

A critical element of the drive to increase compliance relates to the Amendment of the Revenue Administration Bill. This Bill has had a difficult and contentious passage to date, but I should inform this House that through the deliberations of the Joint Select Committee, significant progress has been made toward achieving changes which will facilitate greater efficiency and equity in tax collection.

I wish here to make two comments with regard to the remaining work which needs to be done in carrying this Bill through the Joint Select Committee and through Parliament but with the maximum support of all relevant interest groups. The Joint Select Committee has worked assiduously with these various groups in terms of addressing particular clauses which have caused concern. It is my understanding that the one major area which continues to cause concern is the proposed amendment to Section 31A, Subsection 4 of the Income Tax Act. In brief, it relates to the proposed requirement that institutions be required on a monthly basis to furnish the Commissioner of Income Tax with detailed information on the amounts of interest paid to each individual and the tax deducted.

I have had discussions with the various private sector groups which have expressed this concern and I wish to announce, that subject to our detailing the specific legal terminology, we have an agreement in principle, of how this matter can be addressed without arousing fears of invasion of privacy, thus leading to capital flight. The compromise is facilitated by the fact that the private sector groups and the Administration are united around twin objectives:

• tax which is due and payable must be collected; and
• nothing should be done which fuels fears, however unfounded, about invasion of privacy.

This agreement is a clear demonstration of the Administration's willingness to work closely with the private sector in reaching a compromise which does justice to the positions and concerns of both sides. In that same vein, I hereby make a public appeal to the Leader of' the Opposition to end the Opposition's boycott of the Joint Select Committee and allow the members nominated from both Houses of Parliament to represent the Opposition to participate in finalizing this most important Bill.

I turn next to another issue which I have no doubt will be the subject of much debate. I relates to persons who are eligible to pay taxes, who have been delinquent to date, fo whatever reasons, who now wish to become part of the formal system, but who fear th penalties which would be exacted, were they to suddenly declare themselves.

This is a very controversial issue in that the natural reaction of many, but particularly those fixed income persons who have no choice but to pay their fair share, (some would say more than their fair share) is that the tax authorities have been delinquent in not pursuing those outside of the tax net. I must confess that I have a great deal of sympathy for the anger o the fixed income taxpayer who has always felt exploited. However, from a pragmatic point of view, the fact is, the extent to which we can facilitate the legalisation of a larger number of persons, and their inclusion in our formal economy, the greater the benefits for all.

Within that context I wish to announce a programme called "Coming in from the Cold." Over the next four months all delinquents taxpayers have the opportunity to register with the appropriate officials subject to the following conditions:

• The Commissioners will accept the taxpayer's declaration of his tax liability, subject to final review by the Authorities;
• Current liabilities must be paid;
• The taxpayer must reach an agreement with the relevant departments to liquidate their arrears over a specified period.

"Coming in from the Cold" may be defined as an amnesty, in that it will be possible for the new taxpayer to negotiate with the Commissioners a period over which the arrears will be cleared. To the extent that this action achieves the simultaneous objectives of broadening the tax base and facilitating the entry of others into the legal economy, then we would regard it as a successful initiative.

I now turn to the issues of the new tax measures and the new user fees to be introduced for fiscal year 1998/99.

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