JLP’s income tax proposal will give Public Sector workers a big boost

The proposal to remove income tax from those earning less than $1.5m per annum is music to the ear of many public sector workers, but bad news for politicians who earns above $5m per annum.

The main reason for the opposition by the PNP is not that the system cannot work,instead it means they will now have to pay income tax on their full income, which means less money in their pockets. Recall the PNP in opposition refused to signed the agreement for 10% salary cut.

Based on my calculation public sector workers will see a net salary increase above the 7% the PNP gave them over a two year period and so they will have a much better pay day going forward.

At the lower scale workers will see about a 7.12% increase in salaries and up to 17.10% on the upper end.

Given this massive increase, the Government has no need to increase public sector wages at the end of this contract period, given the size of this increase.

This could save the Government in the order of  $6.6bb dollars in salaries and wages from 2018  onwards until the next wage increase would be due in 2020

 

See table below

.

5% 25% % Increase
Basic Salary $850,000 $850,000
NIS $42,500 $42,500
Threshold $592,800  $    1,500,000
Tax $53,675 0
After Tax Inc $753,825 $807,500 7.12%
Basic Salary  $    1,000,000  $    1,000,000
NIS  $          50,000  $          50,000
Threshold $592,800  $    1,500,000
Tax $89,300 0
After Tax Inc $860,700 $950,000 10.38%
Basic Salary  $    1,200,000  $    1,200,000
NIS  $          60,000  $          60,000
Threshold $592,800  $                     –
Tax $136,800 0
After Tax Inc $1,003,200 $1,140,000 13.64%
Basic Salary  $    1,400,000  $    1,400,000
NIS  $          70,000  $          70,000
Threshold $592,800  $                     –
Tax $184,300 0
After Tax Inc $1,145,700 $1,330,000 16.09%
Basic Salary  $    1,500,000  $    1,500,000
NIS  $          75,000  $          75,000
Threshold $592,800  $                     –
Tax $208,050 0
After Tax Inc $1,216,950 $1,425,000 17.10%

Public sector workers should vote for an increase in pay come payday after being suffering for 5 years of a wage freeze and the insult of 4% pay increase.

The JLP proposal will give you a 7.12% increase in the very first year, making your lives much better, but guess what your unions are not in agreement, how ironic.

Bless

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2 Responses

  1. There are Jay’s fallacies above and then there is the truth below:

    Private sector interests say JLP’s tax proposal not feasible
    6:10 pm, Fri February 19, 2016

    A team from the private sector tasked with reviewing the opposition Jamaica Labour Party’s (JLP) tax proposal has punched holes in the suggested reforms and has concluded that it will not work.

    RJR News obtained a copy of a document titled “Assessment of PAYE Reform Proposals-Private and Confidential” which provides a detailed analysis of the JLP proposal.

    In the three page document, the team assessed the JLP’s proposal to remove personal income tax from the salaries of those earning up to $1.5m annually and it found the proposal wanting on various levels.

    First the tax team assessed if the proposal was equitable and certain….and said it is not. It said is borne out in the fact that people earning a few hundred thousand dollars more than the $1.5 million may be worse off than those earning that sum…because of the tax they would have to pay.

    It did an assessment on two salary levels…one earning $1. 5 million now…and the other earning $1,592,800

    It says excluding the impact of other statutory deductions…the person earning more money would take home $157,000 because of his tax liability with the JLP’s proposal.

    The tax team said given that distortionary impact…people earning up to $1. 8 million may ask their employees for a salary cut, just to take home more money.

    The team said the proposal would discourage people from seeking more money either from bonus, overtime, promotion or pay increases which may marginally increase their annual income above $1.5 million .The team said the same issue would arise for those earning marginally above $5 million.

    Those people would be required to pay tax on all their income without a threshold…and may also request a pay cut to ensure more money is available to take home.

    The tax team says such moves may create “significant headaches for payroll administrators” who would have to contend with shifting tax obligations for employees who may earn monies over the tax threshold.

    The private sector tax team says JLP’s tax proposal not feasible and it would be better if the government revisits the Private Sector Working Group’s tax proposals which were submitted in 2012…because that document is clearly a more preferable approach to income tax reform.

    Justice Minister weighs in

    Justice Minister Mark Golding in commenting on the proposal said it has not received backing from stakeholders.

    “I think it is important to note that the proposal has not received strong support from persons out there who know about tax matters and economics. In terms of the funding of the proposal, it will cost a great deal of money to give away that revenue,” Golding said.

    http://rjrnewsonline.com/local/private-sector-interests-say-jlps-tax-proposal-not-feasible

    • Now please tell me why the very same system works in the UK
      Band Rate Income after allowances 2015 to 2016
      Starting rate for savings 10% (0% from 2015 to 2016) Up to £5,000
      Basic rate 20% Up to £31,785
      Higher rate 40% £31,786 to £150,000
      Additional rate 45% Over £150,001

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