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Vat In Jamaica Essay

1127 words - 5 pages

In Jamaica value-added tax takes two different forms; these are General Consumption Tax (GCT) and Special Consumption Tax (SCT) which consist of specific excise tax in the country in relation to the financial sector. The implementation of these tax systems occurred on October 22nd 1991 at a rate of 10%; replacing eight (8) different forms of taxation in the country, some of which are customs and entertainment duties. These value-added tax systems were implemented to reverse the deficit of the country and serve as a catalyst for economic growth. In an attempt to encourage the economic growth of Jamaica the tax system of GCT went under further reform in 1993, 1995 and 2003 in an aid to refine the tax system to better suit the country. It is in this regard that the reform of 1993 led to the removal of a number of zero-rated items to the exemption category and also raised the standard rate of the tax from 10% to 12.5%. It was in the 1995 reform that the standard rate of 12.5% was then raised to 15% inclusive of the addition of more items to the exemption list. According to Edimston an Economist at the University of Toronto, the increase in exempted items within the tax system and its reforms was to ensure that goods and service that were considered vital to lower income homes remained affordable for the lower class in the country(2010). In the 2003 reform, Jamaica removed some of the items from the list of exemptions because the increase in such items affect the revenue making capacity of the country thus resulting in substantive decreases in revenue. In addition, an increase of the rate of the items that were once zero-rated was also implemented. .It was after these reforms that GCT and SCT were seen as critical forms of revenue for the country as they accounted for 37.4% of the total revenue of Jamaica during the 2003 reform. In addition to the increase in revenue, 8.3% of Jamaica's Gross Domestic Product (GDP) resulted solely from GCT the tax added to all goods and services of the country during that period (Edmiston, 2007).
Although it seems that revenues began to increase after those reforms, in 2006 another tax reform took place resulting in an increased standard rate to 16%. In addition to the increase 16%, a rate of 12.5% was applied to products within construction and special rates were applied to the telecommunication, motor vehicles, and the hotel sectors. These measures were taken because Jamaica was still unable to significantly decrease its national deficit. In 2010 the standard rate was increased to 17.5% and decreased in 2012 to 16.5%. 16.5% is the current tax rate. With the reforms that took place in Jamaica in regard to VAT the Government had to change the threshold several times since its implementation. During the initial process the threshold of the value-added tax was set at $144,000 Jamaican Dollars this then increased to $300,000 Jamaican Dollars in 2003. The reason for this change was to enable the government to maintain...

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