Tax re­fund, do­mes­tic ar­rears stock de­cline fur­ther

Jamaica Gleaner - - BUSINESS - McPherse Thomp­son As­sis­tant Ed­i­tor – Busi­ness mcpherse.thomp­son@glean­erjm.com

THE STOCK of tax re­fund ar­rears was re­duced by $4.4 bil­lion dur­ing fis­cal year 2015/16 and stood at $17.3 bil­lion at the end of that pe­riod, ac­cord­ing to the Govern­ment’s in­terim Fis­cal Pol­icy Pa­per tabled in Par­lia­ment two weeks ago.

It con­tin­ues to be steadily re­duced, fur­ther de­clin­ing to $14.8 bil­lion at the end of July 2016, rep­re­sent­ing a $2.5-bil­lion re­duc­tion since the start of fis­cal year 2016/17, it said.

Ac­cord­ing to the Fis­cal Pol­icy Pa­per, tax re­fund ar­rears are be­ing closely man­aged by the Govern­ment of Ja­maica to en­sure that the ar­rears de­cline as pro­grammed.

The level of tax re­fund ar­rears is mon­i­tored un­der the In­ter­na­tional Mon­e­tary Fund (IMF) ex­tended fund fa­cil­ity ar­range­ment with Ja­maica and is a quan­ti­ta­tive tar­get that has been met un­der suc­ces­sive quar­terly Fund re­views, the pa­per said.

Also dur­ing fis­cal year 2015/16, the stock of do­mes­tic ar­rears was re­duced by $524.3 mil­lion to $21 bil­lion, and a fur­ther re­duc­tion by $128.7 mil­lion as at the end of July 2016.

The Govern­ment said that is also closely man­aged and mon­i­tored un­der the IMF pro­gramme.

Ac­cord­ing to the IMF’s Au­gust 2016 mem­o­ran­dum of eco­nomic and fi­nan­cial poli­cies, cen­tral govern­ment ac­cu­mu­la­tion of tax re­fund and do­mes­tic ar­rears are con­tin­u­ous per­for­mance cri­te­ria. The ac­cu­mu­la­tion is mea­sured against the stock at the end of March 2016, which was J$21 bil­lion for do­mes­tic ar­rears, and J$17.3 bil­lion for tax ar­rears.

NO IN­DICA­TIVE TAR­GETS

How­ever, un­like the ac­cu­mu­la­tion of the pri­mary bal­ance and tax rev­enues for which there are spe­cific dol­lar amounts which must be ac­crued each quar­ter un­der the pro­gramme, there are no in­dica­tive tar­gets for the re­duc­tion in tax re­fund and do­mes­tic ar­rears.

For­mer Finance Min­is­ter Dr Peter Phillips had given a fouryear com­mit­ment to re­im­burse fi­nan­cial in­sti­tu­tions and pen­sion funds for with­hold­ing taxes.

The finance min­istry had not re­sponded to a re­quest for con­fir­ma­tion of the to­tal amount out­stand­ing for all in­sti­tu­tions, which was said to in­clude banks, build­ing so­ci­eties and in­surance com­pa­nies. How­ever, its Fis­cal Pol­icy Pa­per 2014/15 dis­closed plans to start pay­ing re­funds at a rate of $1 bil­lion monthly.

“The GOJ in­tends to elim­i­nate the stock of out­stand­ing with­hold­ing tax re­funds (over 90 days) over the next four years,” said the Fis­cal Pol­icy Pa­per Par­lia­ment then.

Ac­cord­ing to the tech­ni­cal mem­o­ran­dum of un­der­stand­ing ac­com­pa­ny­ing the IMF Au­gust 2016 re­port, quar­terly tax re­fund ar­rears are de­fined as obli­ga­tions on tax re­funds in ac­cor­dance with tax leg­is­la­tion that re­main un­paid 90 days after the due date.

This ac­cu­mu­la­tion is mea­sured as the change in the stock of tax re­fund ar­rears rel­a­tive to the stock at end-March 2016, which stood at J$17.3 bil­lion.

Do­mes­tic ar­rears are de­fined as pay­ments to res­i­dents de­ter­mined by con­trac­tual obli­ga­tions that re­main un­paid 90 days after the due date.

Un­der that def­i­ni­tion, the due date refers to the date on which do­mes­tic debt pay­ments are due ac­cord­ing to the rel­e­vant con­trac­tual agree­ment, tak­ing into ac­count any con­trac­tual grace pe­ri­ods.

Cen­tral govern­ment do­mes­tic ar­rears in­clude ar­rears on do­mes­tic cen­tral govern­ment di­rect debt, in­clud­ing to sup­pli­ers and all re­cur­rent and cap­i­tal ex­pen­di­ture com­mit­ments. This ac­cu­mu­la­tion is mea­sured as the change in the stock of do­mes­tic ar­rears rel­a­tive to the stock at end-March 2016, which stood at J$21 bil­lion. tabled in The tax of­fice at Cross Roads, Kingston.

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