Project Narrative

Project Publications

Project Team

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Project Narrative:

In 2003, the Government of Jamaica was contemplating reforms to address persistent budget deficits due, in part, to the suboptimal performance of the tax system. In response to a request by Jamaica’s Ministry of Finance, the International Studies Program of the Andrew Young School was contracted to conduct the Jamaican Comprehensive Tax Reform Project of 2003-05, now known a the Matalon Report. Jamaica had not undertaken a review of such proportions in nearly 20 years. The initial assessment of Jamaica's tax system took place in November 2003, whereas the final report was delivered to the Minister of Finance in December 2004.

The review team provided extensive reviews of Jamaica’s major direct and indirect taxes, including the income and payroll taxes, property taxes, customs tariffs, and value-added tax. The final report also included an evaluation of Jamaica's system of tax incentives, distributional analyses, and a variety of tax reform options.

The report recommended that, first, a choice needed to be made as to whether the reform would be incremental or comprehensive. Once the idea of a comprehensive reform vs. incremental reform was sorted out, the next issue to deal with would need to be the objective(s) to be stressed. For example, if the plan was an incremental reform, then one would need to shop a menu of options, and probably concentrate on the revenue impacts of eliminating some obvious flaws in the tax system. With a comprehensive reform, one would begin with a thinking through of the overarching goals of the reform, and then shape the menu of reform options to a package that fits the goals.

The final report and resulting book published by the Planning Institute of Jamaica includes an examination of a menu of reform options on a tax by tax basis, which are made up of some proposals made by the Tax Reform Committee and by the general public. All of these options are merely a menu of possibilities and do not necessarily fit together, and in some cases the options are alternatives. The extensive list includes reform options for Property Tax, Property Transfer Tax and Stamp Duty, Individual Income Tax, HEART, Education Tax, CSFBS, NIS, NHT, Corporate Income Tax and Incentives, General Consumption Tax and Special Consumption Tax, and Taxes on International Trade.

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Project Publications:

	Tax Reform and Economic Development: The Jamaican Case Roy Bahl and Sally Wallace, 2007 Abstract: View/Hide This book is about how the Jamaican tax structure might be revised in ways that could strengthen the economy. It is argued here that tax reformers must address two key issues. The first is whether they believe that the tax system can be changed in ways that actually; could lead to better performance of the Jamaican economy. The second is identification of the specific tax structure changes needed for this improvement in performance. On both issues, one comes up against the question of whether the present practice of targeting favored sectors for tax preferences is worth the tax base erosion that it costs. It is also believed that Jamaica's tax problems are in no small part due to weak enforcement of the tax system. In this book, however, the focus will be on tax structure reform and not on administrative reform.
	Tax Burden in Jamaica Roy Bahl, Sally Wallace, Dillon Alleyne, James Alm, 2007 Abstract: View/Hide The Government of Jamaica imposes a wide range of taxes on income, consumption, and property. An important consideration in any reform of these taxes is their impact of the distribution of income, or their tax burden. This staff paper presents background and analysis of the burden of the existing system of taxes. The question of “who bears the final burden of a tax?” is a fundamental one. Any tax will cause individuals and firms to change their behaviors, and the resulting changes in product and factor prices will affect the “incidence”, or the distributional effects, of the tax. Economists have devoted much attention to the question of tax incidence. Although there is wide agreement about the incidence of some taxes, such as excise or individual income taxes, the incidence of other taxes remains controversial. Even so, several basic “principles” of tax incidence should be kept in mind.
	Taxation and Economic Efficiency in Jamaica Miles K. Light, December 2004 Abstract: View/Hide This report presents a quantitative economic model used to determine the macroeconomic impact of tax reforms in Jamaica. We identify the magnitude and nature of changes to production, trade, and consumer welfare related to raising additional government funds. The current results suggest that simply increasing rates under the existing tax structure will produce a low tax yield and high efficiency costs. Although the Jamaican people are impacted in any scenario, the tax burden can be mitigated by improving tax compliance and by eliminating several pre-existing tax distortions. For example, the welfare cost of funds related to GCT taxation can be reduced by 50% by moving to a fully-uniform rate structure. Import tariffs could be improved by 12.5%. If Jamaican labor supply is elastic, as it seems to be, then labor taxation is inefficient. Conversely, labor taxes may be relatively efficient if supply elasticity is low, but the incidence is is then borne mostly by workers. The aggregate welfare effects and tax collections of a comprehensive tax package will depend upon the magnitude of each tax change and the final rate structure. This report identifies why some tax streams are more or less efficient, and why they may collect more or les tax revenues. AS an economic research report, several institutional and legal conditions known to exist in Jamaica are ignored here. Ultimately, tax collections and their effect upon the Jamaican population will depend upon economic forces as well as institutional conditions.
	Taxing Consumption in Jamaica: The GCT and the SCT Kelly D. Edmiston and Richard M. Bird, December 2004 Abstract: View/Hide The GCT and SCT are critically important revenue sources in Jamaica, accounting for 37.4 percent of total revenues in fiscal year 2003/04 (27.7 percent for GCT alone) and an estimated 11.2 percent of GDP (8.3 percent for GCT alone). In this paper we set out in some detail the present structure and administration of the GCT and SCT and evaluate the performance of these taxes from several angles - as revenue generators, with respect to their distributional effects, and in an international comparison. We end with recommendations for reform.
	Payroll Taxes and Contributions James Alm and Sally Wallace, December 2004 Abstract: View/Hide This staff paper analyzes this “system” of payroll taxes and contributions, focusing mainly on the tax and contribution side rather than on the benefit aspects of the contribution programs. The administration of each of these payroll programs is discussed, and the effects of the entire system are also analyzed. Much of the analyses is based on microsimulation models developed in the course of this tax reform project.
	The Jamaican Individual Income Tax James Alm and Sally Wallace, December 2004 Abstract: View/Hide The Government of Jamaica imposes a wide range of taxes on income, consumption, and property. An important consideration in any reform of these taxes is their impact of the distribution of income, or their tax burden. This staff paper presents background and analysis of the burden of the existing system of taxes. The question of “who bears the final burden of a tax?” is a fundamental one. Any tax will cause individuals and firms to change their behaviors, and the resulting changes in product and factor prices will affect the “incidence”, or the distributional effects, of the tax. Economists have devoted much attention to the question of tax incidence. Although there is wide agreement about the incidence of some taxes, such as excise or individual income taxes, the incidence of other taxes remains controversial. Even so, several basic “principles” of tax incidence should be kept in mind.
	Taxation Issues in The Jamaican External Trade Sector Felix K. Rioja and Keith E. Maskus, December 2004 Abstract: View/Hide This report is concerned with issues of the efficiency and revenue aspects of the current Jamaican taxes on trade, including tariffs, other charges, customs valuation questions, and incentives. It also considers revenue implications of further Jamaican tariff liberalization through the World Trade Organization (WTO) as a member of the Caribbean Community (CARICOM) and through the proposed Free Trade Agreement of the Americas (FTAA). Finally, it comments on the scope for integrating tariff reform with reforms in domestic taxes in order to recoup potential revenue losses and increase the efficiency of the tax system.
	Corporate Income Tax and Tax Incentives Mark Rider, December 2004 Abstract: View/Hide The Corporate Income Tax (CIT) in Jamaica is an important source of revenue. In 2002, the share of CIT in total tax revenue was approximately 6.9 percent, having fallen from 12.7 percent in 1993. Although OECD countries generally collect about 10 percent of tax revenue from corporate taxes, the downward trending share exhibited by the CIT in Jamaica is generally consistent with international experience. In fact, the share in Jamaica may be greater than expected given the large number of tax incentives and administrative weaknesses in the enforcement of Jamaica’s CIT.
	Property Transfer Tax and Stamp Duty Roy Bahl, December 2004 Abstract: View/Hide The stamp duty and property transfer tax in Jamaica yielded less than J$4 billion in revenues in 2003. As a percent of GDP, and as a percent of total taxes raised, there has been a long term decline in revenue from these two sources. However, even though these taxes do not dominate the revenue structure, they often figure prominently in discussions about what is wrong with Jamaica’s tax system. There are many problems with the stamp duty and property transfer tax and there have been calls for their elimination. Why have they been retained? Even at only about 4 percent of total taxes, they account for a significant amount of revenue. In fact, in 2002-2003, revenues from these two taxes were equivalent in amount to 22 percent of collections from the domestic portion of the GCT. Another justification for these taxes is that they plug a hole in a leaky tax enforcement system, and capture some Jamaicans who may escape the income tax net.
	The Land Value Tax in Jamaica: An Analysis and Options for Reform David L. Sjoquist, December 2004 Abstract: View/Hide This Working Paper on the property tax contains an Executive Summary and four chapters. In Chapter One we describe how the Jamaican property tax functions. In Chapter Two we present an analysis of various problems and issues that surround of the property tax. Chapter Three, which was co-authored with Ki-Whan Choi, presents an analysis of a land value tax versus a capital value tax. Finally, in Chapter Four we present options for reform.

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