No new taxes! Whew! Had me worried there for a sec with this pandemic! With a crippled tourism industry and falling government revenues, I wasn’t sure what the government was gonna come with for this budget. Well, Finance Minister Dr. Nigel Clarke made his budget presentation last week Tuesday, March 9, and I feel like I had a little nostalgia because guess what? I started Money Mondays two years ago with a breakdown of the budget. 

First of all, let me start by giving Dr. Clarke a one-woman standing ovation. Bravo! It was an inspired presentation by the Finance Minister. And I’m not saying this to be political at all. I think he hit all the right points and priorities for a time like this. So let’s go through them.

Worst economic decline in history!

He started by setting the stage, describing the negative impact of coronavirus on the Jamaican economy. It is estimated that our economy will contract by 12% for the 2020/2021 fiscal year.  That’s the year we’re currently in.  It ends on March 31, so that would take into account one full year of living with COVID-19, since the pandemic hit our shores on March 10, 2020 and as you know, the rest is history.  Just look at tourism as a major example. In the 2019/20 fiscal year, Jamaica earned US$3.4 billion from tourism.  This year, we didn’t even earn one billion. 

We’ve made a lot of sacrifices as a country over the past ten years. From back to back IMF programmes, large amounts of money set aside for debt repayment to the detriment of things like health, education and roadworks, and public sector workers having to make a dollar out of fifteen cents with fewer staff and even fewer resources. Even after the IMF programmes ended, the government continued with many of those policies.  Well it turns out it was a good thing we were so disciplined, even in the face of criticism, because these sacrifices led to increases in the country’s cash reserves. It is these same cash reserves that have helped us through this pandemic. You know how people always say, save your money for a rainy day? Well it’s definitely raining now.

When the pandemic hit, Jamaica had about ninety billion dollars in cash reserves (J$90B).  That’s a lot of money when compared to previous years. This money allowed the government to help businesses and people through the CARE Programme and to buy Personal Protective Equipment and build field hospitals to provide more space for Covid-19 patients.  

“Good policies expand opportunities and provide flexibility when we need to respond to a crisis,” said Dr. Clarke during his opening presentation.

Now into the actual budget: 

For the upcoming fiscal year, the government expects to collect J$807.3 billion from taxes, loan receipts and grants. They’ll also be using J$24 billion of cash saved up in prior years to finance expenses. Tell you about saving for a rainy day.

The government plans to spend J$831 billion (a little less than what they’ve spent this current year). As usual, one-third will go towards paying back our debt. I’m looking forward to the day when our debt servicing is much less, and those funds can be put to better use. 

The rest will go towards ministries and agencies and salaries for public sector workers, who by the way will be getting a small raise. 

Fifty-four billion dollars (J$54B) will be spent on capital projects under the SERVE Jamaica Programme.   

SERVE is short for Social Economic Recovery and Vaccine Programme. It’s  sixty billion in total. Under this programme, funds will be given to the Ministry of Health to buy vaccines, PPEs and cover other health care costs.

Now get this.  One hundred thousand (100,000) persons sixty years and older will get a $10,000 grant if they get vaccinated against COVID-19.  But they will only be eligible if they earn less than J$1.5 million dollars (about US$10,000) a year in pension or salary. 

Under SERVE, medium and small businesses and farmers also stand to benefit. The SET Cash program, BEST Cash grants for tourism workers, and grants to the disabled community will also continue.

The government also has plans to build a new toll road between May Pen in Clarendon and Williamsfield in Manchester, a Montego Bay Bypass and to install drain, water and wastewater infrastructure.

Help for businesses

It doesn’t stop there.  The Minister of Finance made several other announcements that will help to make it easier to do business in Jamaica.

Apart from no new taxes, the biggest highlight for me is the removal of the Customs Administrative Fee (CAF) for permanent exports worth US$500 or less. 

Now let me tell why this is such a big deal. If someone abroad wants to buy a t-shirt on my website, kalilahreynolds.com for US$25 – that’s less than J$4000 – I have to pay a Customs Administration Fee of J$3000 to the government. So now the cost of the t-shirt goes up to nearly J$7000 or US$45! Ridiculous! It makes my item uncompetitive because nobody wants to pay that. And at a time when we should be trying to boost exports so we can earn more foreign exchange, it really is a counterproductive fee, so I’m glad to see the back of it.  This will only cost the government J$70 million dollars (less than half a million US). They can well afford that, and the gains in exports will more than pay back for it.  Yes sir, policy matters! I hear you, Minister Clarke.

Womp womp – no increase in duty-free limit

Speaking of Customs though, on the downside, I know there’s been a lot of lobbying for the US$50 duty-free limit on imports to be raised. Yeah that’s not gonna happen. I didn’t expect it, and the Finance Minister said as much.  Maybe another time, but for right now, we can understand why the government needs that revenue.

Other measures

So let’s get into some of the other measures. Effective April 1, students applying for loans from the Students’ Loan Bureau will only need one guarantor. This feels like half the stress of applying for loans from the SLB has been removed. 

And here’s an interesting one.  The BOJ has plans to pilot a Central Bank Digital Currency early next year. The digital currency will allow you to make or collect payments using your phone. Remember I explained this a few months ago. You can click here to learn more about Central Bank Digital Currencies, CBDCs.  We’re also talking about it this week on Taking Stock.

Another great one! The due date for filing your income taxes will change from March 15 to April 15. This will give us more time to get things in order, and make a huge difference to the government, as they’ll now be collecting most of their taxes at the start of the financial year rather than waiting for the last minute as the year is ending. 

Credit Unions will come under the supervision of the Bank of Jamaica. This means they’ll now be able to borrow from the BOJ.  On the flip side, credit unions will have to improve their Know Your Customers requirements. Hopefully this doesn’t mean that they’ll start asking for your baby tooth and first pair of shoes like the banks do when you go to sign up for an account. 

No new taxes!

Now back to the issue of taxes.  Some people might have been expecting new revenue measures because there’s been such a big hit to the government’s coffers.  But according to the Minster, new taxes won’t help us to recover as quickly as possible from the pandemic. You remember the days when after budget presentations, all we could talk about was baning our bellies for the next fiscal year? And now, we’ve had four consecutive years of no new taxes. I think that’s a major accomplishment that they’ve been able to do this in the year of the pandemic, given all that’s happened this past year. 

So how do you feel about the budget? Were you as inspired as I was?  Let me know in the comments below.

Categories: MoneyMondaysJA