Tax - How much is too much?

Administrator on April 27, 2014, 12:44 pm 1710 3
Tax - How much is too much?

Are Jamaicans being overtaxed? Who are the true victims of over taxation? These are some of the questions that are at the tip of the tongues of Jamaicans after hearing the 2014 budget and the new tax package.

Over the years Jamaicans have been overwhelmed to the point of frustation whenever the government's resolve for earning revenue is primarily through taxing its citizens. Is it that the leaders are lacking in creativity or are they taking the easy way out?

Believe it or not government members (MPs) are the employees of the nation who were entrusted with managing the nation's business. Like any successful company there has to be cooperation among leaders and workers. The workers look to the leaders to make prudent decisions that are not only beneficial to the company but also to their well being.Consider this, when an employee is under performing and not meeting his/her objectives - is anyone held accountable? Or When a manager sits back and issues orders to get the job done without consideration for his/her subordinates - are they praised as being good leaders? Wouldn't it be easier for the manager to get his/her hands dirty and help to build a good relationship,which would more often that not create loyalty with subordinates? You may be wondering why all the questions - well it is simple. In order to be an effective leader of a nation you need to put the nations interests ahead of your own and you need to be willing to make the hard decisions that will ultimately lead to a better nation for everyone. One leader that I believe is on the correct path of running his country is the Uraguay's President, Jose Mujica who holds the title of being the World's poorest President. He donates 90% of his monthly salary of $USD 12,000 to charities that benefits the poor.

It is evident that Jamaica is stratified into classes like any other country and realistically everyone would love to have taxes levied proportionately according to each persons earnings. So, if you earn less you are expected to pay less in taxes and the opposite would apply to the persons earning more, as deductions would be a percentage of total earnings, making it less of a burden on any class.

However, this is never usually the case, the middle class are the ones carrying the brunt of the tax burden. In Jamaica statutory taxes alone account for approximately 31% of taxable income. So, if your household earns a taxable income of$JMD 100,000 per month, your net income is $69,000 after deductions. If you are an employee working with the government this has been your salary for the past few years because of the MOU wage freeze agreement. Hats off to all the financial geniuses who are surviving on a fixed income while goods and services are increasing daily.

Examine the table below which provides an estimate of a typical middle class person's monthly expenses. It is an estimate because some middle class persons may own additional assets. However, the aim is to capture basic items a typical middle class person should have at their convenience.

The scenario is household without children and owns basic items such as stove, refridgerator, iron, television, shelter (pays rent/mortgage). They would further have expenses such as light,water,travel,cellphone,internet,grocery.

Light4,500 *
Water2,000 **
CellPhone2,500 (Postpaid)

* - With increases in fuel charges which makes up a majority of this bill and the unlikelihood of consuming less than 100 kilowatt hours per month.
** - If living in the city or a new scheme you may pay more due to the fact that sewage system doubles your bill.

This paints a simple picture. The typical middle class citizens are living a literal life of "Hand to Mouth".

In Jamaica it is common knowledge that the middle class citizens are the ones that feel the burden of taxes. The wealthy or upper class has the know-how to avoid taxes and certain measures being implemented to include this group into the income generation for the government. The lower class on the other hand in most cases will fall below tax treshholds.

  • What about the middle class household with children?
  • How will these new taxes further affect the already struggling middle class?
  • Can middle class household remain within this bracket for much longer given the fact that expenses are on the rise?
  • What will happen if most Jamaican citizens no longer exists in the middle class scope?
  • When will our government develop strategies specific for our country rather than "borrowing" from other countries?


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