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The 1999/2000 fiscal profile calls for an expenditure of $160 billion with approximately $67.3 billion on Recurrent, $10.4 on Capital and $62.4 billion for Amortization. The obvious question of interest is how will this level of expenditure be funded. We project tax revenues at $74.8 billion, non-tax revenue at $4 billion, Bauxite levy $2.3 billion, project loans of $2.6 billion, domestic borrowings of $50 billion. When combined with other sources, this provides a total of $135.8 billion. This leave a gap of $24.3 billion. Before I discuss how this gap will be filled, let me say something about projected tax revenue. The figure of $74.8 billion, which is a passive projection compares with an out-turn of $67 billion for 98/99. This represents an increase of approximately 12%. We have deliberately been conservative in our projection, given our experience of last year when we were overly ambitious. We feel confident that we will make this target given significant administrative changes which will take effect by the end of the first quarter of this fiscal year. Now to the gap. To close this gap of $24.3 billion, we intend to approach the external markets for US$400 million, approximately J$15.4 billion. We intend to garner divestment proceeds of $5.2 billion. These two total $20.6 billion. As regards the divestment proceeds, as I indicated before, we have targeted divesting of assets to the tune of US$150 million and we are well on our way to achieving this target. In fact, we have already concluded deals to the tune of (US)$56 billion including the sale of shares in Carib Cement, shares in CIBC Jamaica Ltd, sale of PETROJAM (Belize) and sale of Sandals (Ocho Rios). Furthermore, we expect to have concluded sales and receive proceeds of US$90 million by the first half of the fiscal year, i.e. e by the end of September. As I have indicated before, the intervention in the financial sector has been costly and will be a major cost for several years to come. In fact, the allocation for FINSAC debt servicing for this year is only slightly smaller than the expenditure on Capital projects. There is no way to deal with this intervention other than by a tax package. At the same time, there is a major area of investment which has to be addressed and is being addressed i.e. e, the transportation sector. We cannot allow our citizens to continue to travel in sub-human conditions. Already the Government has spent $1.6 billion on the acquisition of buses, spare parts and the construction of depots. Over the next eighteen months, an additional $1.2 billion will be spent on acquiring buses and $1.5 billion on the supporting infrastructure for a modern civilized transportation system. (Depots etc) - A total of $4.3 billion on the public transport system. Furthermore, as I have indicated, despite the budget constraints, a major road programme is being implemented. For example, during this fiscal year, Hope Road between Matildas Corner and Kings House will be widened as a four-lane highway costing nearly a quarter of a billion dollars. Washington Boulevard will be improved between Six Miles and Molynes Road for over $200 million, Mandela Highway will be improved between Ferry and Six Miles, costing over $40 million. The stretch from the Old Harbour Roundabout to Bushy Park will be improved costing nearly $110 million. Moneague to Mount Diablo for a similar sum and Trafalgar Road will be improved between Ruthven and St Lucia Close to the tune of $60 million. These two expenditure areas - servicing the FINSAC debt and improving the transportation system and network demand big bucks. And so to contribute to these, the first major taxation item is an increase in the special consumption tax on leaded , unleaded, diesel and kerosene. The increases on these items will range from between $4.25 on diesel to $4.76 on premium per litre, yielding $2.86 billion. The effective date for these increases is, tomorrow, April 16, 1999. There will be an increase in the Special Consumption Tax on cigarettes which will result in an increase of approximately $1.00 per cigarette and yielding just over $150 million from the combination of the Special Consumption Tax and the GCT. The effective date will be April 16, 1999. There will be an increase in the Special Consumption Tax on certain alcoholic beverages. The rates on these will be increased on products such as Sugar Ray Rum. We are not increasing, repeat not, increasing the tax on brewed alcoholic products like beer as there has been a recent price increase which will yield incremental gains for both the GCT and the Special Consumption Tax. The estimated yields from the adjustments of SCT rates on those range of spirits as well as the incremental yield from the recent price increases on brewed products is expected to be $60 million. The effective date will be April 16, 1999. The Departure Tax payable by non cruise passengers will be increased to $1000. This increase will take effect on June 1, 1999 and is estimated to yield $350 million for the rest of the fiscal year. It is proposed to increase the amount payable for motor vehicle licences by thirty three and a third percent with effect from June 1, 1999. This measure is estimated to yield $174 million in the fiscal year. We intend to change the method of taxation of the lotto whereby the tax on winnings will be abolished and replaced by a levy on the amount of gross sales retained by the promoter after prize pay outs have taken place. I should indicate the genesis of this decision to change the method of taxation. You will recall last year when we imposed a tax on winnings a lotto buyer, in an interview, argued that if I wished to participate in winnings, I should buy my own tickets. Point taken. Hence, the change. The view is that there will be increased purchases once the disincentive of the tax on winnings is removed, everyone will do better. The tax will take 23% of the gross sales retained on the lotto game and 17% of the gross sales retained on other lotteries. It is expected that the yield from this new tax arrangement will be $167 million. The decision has been taken to increase the processing fees for documents issued by the Customs Department, many of which do not presently attract any charge despite the obvious cost implied. It is also proposed to introduce a flat fee of $3000 to be charged per container wherever released or stripped. These measures are expected to yield $216 million for the fiscal year and they will take effect on June 1, 1999. In summary, the tax measures and user fees increases are as follows: Summary of Tax Proposals
These measures and fees are expected to yield approximately $3.97 billion or 1.6% of GDP for the fiscal year. We understand only too well the impact of the additional costs but there is no alternative given the need to service the debt incurred through intervention in the financial sector. Undoubtedly these increases will impact on inflation. Our preliminary calculations suggest that the impact of the various tax measures will be increased by 1.1 percentage points. Although this figure is significant, we are still confident of meting the inflation target which we have articulated. || Previous | Table of Contents | Next ||
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