New budget promotes stability but funding of tax giveaway needs clarity, says PwC

Auditing and advisory firm PricewaterhouseCoopers has raised concerns about funding the increased tax threshold and the predicted business losses due to higher depreciation on capital items while lauding the balanced budget presented by the Jamaican Government.

Finance Minister Fayval Williams resisted the “temptation to deliver a ‘run wid it’ Budget in an election year,” wrote Brian Denning, tax lead for Caricom, in the PwC Budget Review.

The term harks back to a stance of a former finance minister, Dr Omar Davies, who led the ministry from 1993 to 2007, a period marked by a series of new taxes to finance the Budget.

In the estimates of expenditure laid out by Williams, revenue and loan receipts to fund the 2025/26 national budget amounted to $1.25 trillion, of which $949 billion will come from recurrent taxes. It marked the eighth consecutive year without new taxes.

“The absence of new taxes reinforces investor confidence and provides stability for businesses to plan and grow,” Denning wrote. This decision, PwC added, aligns with the Government’s ongoing commitment to fiscal discipline even in an election year.

Jamaica’s debt-to-GDP ratio is projected to fall to 68.7 per cent by the end of this fiscal year and is programmed to decrease further to 60 per cent by 2027-28. This is a significant improvement from a “mammoth” 147 per cent in 2013, Denning noted.

The report also addressed the increase in the PIT or personal income tax threshold to $2 million over three years, up from the current $1.7 million, which was set in April 2024. While this measure benefits some earners, PwC highlighted its fiscal impact, stating: “The increases in the income tax threshold over the next three years are estimated to result in a revenue loss of $13.97 billion” while removing approximately 28,880 persons from the tax roll.

“It remains to be seen how this PIT threshold increase will be funded over the next three years,” PwC added.

The Budget also introduced accelerated capital allowances to encourage investments in the productive sector. Businesses can now claim higher write-offs on capital expenditures, supporting retooling and expansion.

“We expect manufacturers, producers, and other commercial enterprises to take advantage of this programme and invest and retool their businesses in 2025 and 2026,” PwC commented. However, it wants clarification on whether this includes expenditure on purchasing, constructing, or renovating assets. The allowances will increase non-cash expenses on books, potentially leading businesses to plan for losses.

“The programme will result in more accelerated tax shelters and reduce income tax payable in earlier years. The impact should be significant and may result in some taxpayers generating tax losses after claiming the allowances,” PwC said.

Jamaica’s economic output or gross domestic product contracted in the last half of 2024 due to lingering effects of Hurricane Beryl and other weather events. The decline negatively impacted key sectors such as agriculture, electricity, and tourism

steven.jackson@gleanerjm.com