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Sunday, April 20, 2014

Why are people upset about the withdrawal tax?

As I'm sure we are all aware of by now, the Government of Jamaica is planning to introduce a new levy on withdrawals. I won't go into the details, but the full paper can be found here (PDF).

Many supporters of the tax are focusing on the dollar amount of the tax, declaring that "it's just $1" and they seem to be surprised at the outrage being voiced throughout the country for such a small amount.

I don't think that the supporters really understand the reasons for the outrage. I think that there's one main reason.

PAYE earners feel overburdened.

After paying 31% in statutory deductions, they pay another 16% to 25% in GCT, which is an effective tax rate of 40%+. On top of that, bank fees and low interest rates mean that it likely costs them more to keep the money in the bank than they'll make in interest. Now they're being asked to shoulder another, albeit relatively small, tax just to withdraw money.

All this while there's an apparent lack of will to go after persons and companies who are suspected of dodging taxes in a meaningful way. We have yet to see the materialization of the oft-promised tax reforms which would make it harder to avoid taxes, even as more and more taxes and costs are heaped upon compliant citizens. Things like 11 companies receiving import waivers valued at $4.2 billion, even while owing $1.2 billion in back taxes, and then asking the public to pay $2.25 billion in a new tax on withdrawals to cover a tax revenue deficit should rightly cause outrage.

So, what can we do? Jamaica is the home of the nine-day wonder, but this time can be different. We can make our voices heard in a number of ways:


  • Demand accountability from your MP - write letters/emails to them asking them to support a call for the rollback of the withdrawal tax and a renewed thrust to collect taxes from the delinquent 
  • Sign the online petitions that are being circulated - I know of two, here and here.
  • Write letters to the editor of the newspapers outlining your concerns. 
  • VOTE! Make sure that you're registered to vote and that you exercise your right in local and general elections.


In the words of Cyril Connolly, "slums may well be breeding-grounds of crime, but middle-class suburbs are incubators of apathy and delirium." It's time to get rid of the apathy.