Gov’t to tax cheques, ABM withdrawals and point of sale transactions
By Balford Henry and Camilo Thame
Sunday, April 20, 2014 35 Comments
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A tax rate of five to 10 cents for every $100 withdrawn from an ABM, swiped at a cash register or written on cheques may not seem so daunting, to some.
But taken together, ABM, point-of-sale (POS) and cheque transactions, totalled over $2 trillion for the 12 months to the end of February this year.
As a result, the Government expects to collect $2.3 billion over nine months (or $3 billion annualised) from a new levy on transactions through deposit taking institutions and securities dealers.
The tax, which will also be chargeable on all electronic banking transactions, Internet transfers (except transfers between two accounts of the same person in the same financial institution), and encashments from securities dealers, will become effective June 1.
Then, 0.1 per cent on every dollar of transactions valued under $1 million passing through pretty much any payment system will be paid over to the Government.
It is not yet clear how the tax will be passed on to consumers, but the levy rate declines as the transaction value increases.
For instance, transactions valued between $1 million and $5 million will be charged 0.09 per cent, while those carrying a value greater than $20 million will be charged 0.05 per cent.
In its rationale for the tax, the finance ministry cited Argentina, Brazil, Peru and Colombia as jurisdictions in which a similar levy has already been introduced.
The government also stated that the impact on the payment system would be small.
“The House (of Parliament) is being asked to note that for withdrawals of $1,000, $5,000 and $10,000, the associated tax payable would be $1, $5 and $10, respectively,” said the ministry paper showing revenue measures for the financial year, which ends March 2015.
Even though data on ebanking, Internet transfers and encashment from securities dealers is not immediately available, it is clear that the new tax is potentially a new cash cow for the government. For example, ABM and POS transactions totalled $680 billion over the 12 months to February 2014, and the value has been growing by 16 per cent a year since 2009.
Indeed, cheque transaction value, which is still twice as much as ABM and POS transactions combined, has been declining by 13.5 per cent a year over the past four years. But most of that decline occured a few years ago, when the Government prompted financial institutions to shift away from cheques towards electronic transfers. Last year, the value of cheque transactions declined eight per cent, compared to the 22 per cent decline experienced in the previous two years.
Opposition spokesman on finance and planning, Audley Shaw, has accused the government of “joining in the raid on consumers pocketbooks”, by planning to introduce a financial transaction tax on withdrawals from their deposits.
Speaking to the press after Thursday’s opening budget presentation by Minister of Finance and Planning, Peter Phillips, Shaw said that the government had obviously decided that, on the heels of the banks’ controversial fees and charges, there was more room “for attacking the pocket books” of the consumers.
“It is clear that the minister has now decided that it is not enough for the commercial banks themselves to be attacking customers with ever increasing charges. He is joining the raid,” the opposition spokesman said. “He is giving company now to the commercial banks, joining in the raid on the pocketbooks of people who decide to go and use electronic banking or at points of sale, and cheques.”
The new withdrawal and encashment tax is part of a raft of revenue measures aimed at raising an additional $6.6 billion in revenue this fiscal year, which began on April 1
Finance Minister: Shortfall in revenues forced announcement of new taxes
Published: Tuesday April 22, 2014 | 12:53 pm Comments 0
Finance Minister Dr Peter Phillips has sought to explain why he has gone back on a declaration he made in January that there was no plan to implement new taxes.
He says he was force to announce the new taxes because of a five per cent shortfall in revenues.
He says the $6.7 billion tax package is one of the smallest revenue packages in years.
Phillips made the remarks during a post budget press conference held at Jamaica House this morning.
The finance minister said the $420 billion collected in revenue for the last fiscal year was less than expected because of factors such as reductions in imports which caused a fall off in border taxes.
He says the reduction in oil prices and the structure of the employment system have led to fewer taxes.
Phillips said the tax measures announced represents the most palatable alternatives.
The Government is proposing to spend $540 billion this fiscal year.
The Finance Minister says it is absolutely necessary that the country stays the course of its economic reform programme.
He says any move backwards would result in Jamaica not being able access money on the international capital markets.