Govt. to lose $1.3B annually in quest to increase workers’ disposable income

Aug 12, 2015 News

By Abena Rockcliffe
The sum of $1.3B may seem huge to the average man, but Minister of Finance Winston Jordan told the National Assembly that this is a small price to pay in order to increase the disposable income of all workers.

Finance Minister, Winston Jordan

The Minister made such utterances on Monday as he took the floor of the National Assembly for his first presentation of the National Budget; one that will be recorded in history as the first budget of the coalition government.
Among the “good news” that Jordan took to the House, was one that NIS contributions will no longer form part of the taxable income as of 2016 thus increasing the disposable income of all workers.
Jordan’s proposed amendment to the Income Tax Act Cap. 81:01 is what will pave the way for the removal of taxes placed on NIS contributions. The Minister in his Budget speech said that the amendment seeks to insert after Section 16(b): “(i) National Insurance contributions by employees.”
Presently, a person’s salary would be subjected to income tax and thereafter, NIS would be deducted, but Jordan is about to do away with this.
“Workers will no longer be paying income tax on their national insurance contributions. Thus, in addition to the tax threshold, the Commissioner General must deduct the NIS contributions of the worker before determining his chargeable income,” said Jordan.
He added, “This will result in a loss of revenue of about $1.3 billion annually but, importantly, it would result in a net increase in the disposable income of all workers.”
Also, the APNU+AFC administration has decided to abandon the subsidies being offered to NIS. Speaking about the cessation of the subsidy to NIS, Jordan said that it is an opportune time to end the practice.
It was noted that the subsidy was introduced to cushion the effects of the increase in NIS rates in 2003.
The Former People’s Progressive Party/Civic administration had agreed to a temporary cushioning of the impact by paying the equivalent of 1% point of the increase for the workers.
“We believe the time is opportune to end this subsidy, given the substantial increases in salaries at the lower level, complemented by the removal of NIS contributions from being taxed,” said Jordan. This measure will take effect from September 2015.