JAMAICA taxes the rich at one of the lowest rates in the world while taxes on the poor are among the highest, according to a new Personal Taxes Study by UHY, an international accountancy network.
It has led to calls to increase the tax threshold in order to reduce the tax burden on Jamaicans.
"The Jamaican Government should take bold steps to increase the tax-free threshold to US$10,000. This measure would have a positive effect on EMPLOYEES
' productivity, and tax revenue loss can be recovered via a sales and consumption tax," stated Dawkins Brown, MANAGING partner of UHY Dawgen in Jamaica.
' productivity, and tax revenue loss can be recovered via a sales and consumption tax," stated Dawkins Brown, MANAGING partner of UHY Dawgen in Jamaica.
The study, released last week, found that individuals earning US$1.5 million (J$168 m) a year pay 29 per cent as INCOME tax in Jamaica compared with the global average of 40 per cent. That equates to US$1.06 million in take-home pay.
tax in Jamaica compared with the global average of 40 per cent. That equates to US$1.06 million in take-home pay.
But the Jamaican scenario flips towards comparatively greater taxation for those who earn smaller salaries. The study found that individuals earning US$25,000 (J$2.8 million) a year pay income tax at 26 per cent in Jamaica while the global average drops to 17 per cent. Interestingly, the European average drops from among the highest in the world at 50 per cent for US$1.5 million earners down to 17 per cent for US$25,000 earners.
Brown explained that on the upside the relatively lower tax rate in Jamaica for high-income individuals could serve as a competitive business advantage.
"While not a lot of employees in Jamaica are earning US$1.5 million or approximately J$14 million per month, this is important to attract high-skilled professionals from abroad, who can train our local staff, resulting in 'effective knowledge transfer'," Brown said in an e-mailed response to Jamaica Observer queries.
Last week, the World Bank announced that Jamaica jumped from roughly 94 to 58 in the ranking of the 2015 Doing Business Report. It resulted in the island topping the region as the most competitive for doing business. Jamaica's improvement resulted from a series of business reforms Government fast-tracked in order to access financing from multilateral agencies, led by the International Monetary Fund (IMF).
"Lower tax rate is definitely a competitive business advantage. Multinationals who seek to expand internationally are motivated by competitive tax policy, both for personal taxes and corporation taxes. As Jamaica improves its ranking in the Doing Business Report, more companies will seek to explore possibilities of setting up subsidiaries here. Tax policy will be a key determinant in this decision," stated Brown.
The study found that some of the lowest rates were in Dubai, at zero personal INCOME tax, and Russia, at 13 per cent. It also indicated that rates were adjusted following the western financial crisis.
tax, and Russia, at 13 per cent. It also indicated that rates were adjusted following the western financial crisis.
"UHY notes that while top-earning western European taxpayers are still losing by comparison with peers globally, several countries (Italy and the UK) have dramatically reduced or withdrawn top rate tax bands imposed following the financial crisis," stated the study.
For example, in 2014, a taxpayer earning US$1.5 million in the UK saved some US$63,600 in taxes compared with two years ago, following the abolition of the 50 per cent tax rate last year, the report said.
The USA also substantially reduced the amount of tax it took from top earners, lowering the tax take from an income of US$1.5 million to 42.5 per cent of earnings from 43.28 per cent. This saved high earners over US$10,600 a year.
Get copy of study:http://www.dawgen.com/…/UHY-Personal-taxes-study-in-Jamaica…
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