Good news: Income tax threshold increased, more benefits for pensioners

March 13, 2024

article reposted by Chelsea


The Government has adjusted the personal income tax threshold from $1.5 million to $1.7 million, and increased pension and age relief exemptions from $80,000 to $250,400. These, along with other measures will cost the Administration just over $50 billion in revenue, Finance Minister Dr Nigel Clarke told the country as he opened the 2024/25 budget debate in Parliament on Tuesday.

Included in the revenue measures are:

* 25 per cent income tax rate for companies providing trust and corporate services;

* Reduction in the corporate income tax rate from 33 1/3 per cent to 25 per cent for independent power providers producing at least 75 per cent of their energy from renewable sources;

* increase in the de minimis value for imported goods from US$50 to US$100;

* increase in the passenger duty-free threshold for personal/household effects not imported for sale or commercial exchange from US$500 to US$1,000;

* increasing the maximum participating voting share capital for the Junior Market on the Stock Exchange from $500 million to $750 million;

* standardising general consumption tax (GCT) treatment on raw foodstuff;

* removal of GCT on armoured cash courier vehicles; and

* reverse tax credit for individuals whose statutory payments have been filed and paid in respect of calendar year 2023.

Pointing out that the increase in the personal income tax threshold will cost the Administration approximately $9 billion, Clarke said, “We are not able to deliver large increases in the threshold in one go… but that doesn’t mean that we can’t do it little by little. It’s an expensive thing. [We have to take it] step by step.”

He said the increases in the pension and age relief exemptions will take effect in the first quarter of fiscal year 2024/25, with the approval and consent of the Association of Government Pensioners. That represents an estimated revenue loss of $1 billion.

The finance minister said that pensioners, aged 65 years and over, will now enjoy a total income tax threshold of “$1.5 million plus the $250,000… [and those aged] 55 and over, will be $1.75 million”.

Clarke also explained that individuals under 55 years of age receiving a pension from an approved statutory pension scheme, or an approved superannuation scheme are entitled to a tax exemption of $80,000 restricted to the pension income only. If the pensioner is 55 years and over, the $80,000 tax exemption can also be applied to the other sources of income. This is known as a pension exemption. This threshold was last adjusted in 2009.

“There are people who are on fixed income who retired during periods of instability [and] are having it hard because their pensions are based on small salaries that are low, and we have a threshold that has been in place from 2009. We must adjust this first  equity demands that,” he said.

Noting that individuals 65 years and older who are in receipt of a pension are also entitled to age relief exemption of $80,000, the minister said that this was also introduced in 2009, and “equity demands that we change this first”.

“The Government remains committed to ensuring adequacy of our social protection system and we recognise significant financial challenges faced by individuals who went before us. We honour you, we respect you, we love you, and we are here for you,” he said.

“We are leveraging macro stability to the people’s benefit. We have $1 billion built into the budget to increase public sector pensions. What we’re going to do this year is, because the people above the threshold are getting the exemption increase… we are going to direct $1 billion that we have in the increase to pensioners, to the pensioners who are earning less than $1.5 million. So the ones above will get the threshold expansion; the ones below, the increase that’s built in the year will be directed totally to them,” he explained.

The announcement was greeted with loud cheers, along with the emphatic pounding of desks by legislators, with some rising to their feet. Government legislator Alando Terrelonge was heard saying the move is “a win for my grandmother and my grandfather. This is a win for every senior citizen”.

Clarke also revealed that a reverse tax credit will be implemented for all Jamaicans who pay into the tax system and earn $3 million and under.

“The reverse tax credit means that every registered taxpayer who, in the completed fiscal year, did their part of contributing to society, whether through PAYE or being self-employed, and who earn under that threshold, this Government will provide for them a reverse tax credit, cash credit of $20,000,” he said.

“We have a total of 570,000 Jamaicans today who contribute to the Jamaican society, statutory deductions, and some through personal income tax who will benefit from this measure. The cost of this programme is $11.4 billion. We consider this money very well spent. Reverse tax credits are not new, they exist in other countries. They never existed before in Jamaica, but we are going to put it in place,” he said.

“So if you are working in a restaurant, serving customers morning, noon and night, you’re working on the floor of the ice cream shop, you’re a janitor in an office building, you are a worker in the hotel, in bartending or you’re tending to the lawns or you’re in the entertainment sector, if you are working as a customer service rep in a retail operation, or wholesale operation, if you’re working at the BPO, I’m talking to you
 any one of the 570,000 persons. What we’re saying to you is that the Government may not be able to solve everything overnight, but we are listening to you. We are hearing you, we are responding to you, and we’re prepared to use creative means that are used in other countries in the world to attend to your circumstances,” the finance minister said.

Clarke said that there is going to be an established system for the processing and payment of the reverse tax credit to be managed by Tax Administration Jamaica.

“This will take some time to set up before it’s ready, because we want to set it up in a way that is durable, so that the mechanism can be potentially available again in the future,” he said.

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