Can Jamaica’s Government afford the 2024 budget?

Can Jamaica’s government afford to fund its record-breaking $1.3 trillion national budget?

So it was revealed last week that the government’s tax collections are falling slightly short of expectations. Of course, taxes are the biggest source of income for the government.

But according to the Ministry of Finance, tax revenues were $28 billion below target in 2023. 

Jamaica’s financial year started on April 1, so the government had to use estimates to craft the budget. 

That’s why it’s called the estimates of expenditure. The Government estimates how much money they will have at the end of the financial year and how much they will spend for the incoming one.

But still, a $28 billion difference is a lot. The Ministry said it was mostly caused by a $14 billion dip in Corporate Income Tax in March alone. 

So does that mean more corporations aren’t paying their taxes?  Or were there some concessions there? I’ll come back to this later.

Anyway, how does this affect you and your money? 

Well like I said before, taxes are by far the biggest source of income for the government.  Those tax dollars have to come in, so that the government can spend on schools, roads, public sector salaries, etc.

This year, they plan to spend a record $1.3 trillion.  And they expected $1 trillion of that to come from your tax dollars.

But if the government is collecting less taxes, that means they have less money to spend. In this case, $28 billion less.

So does that mean one or more of the government’s initiatives will be cut?

Finance Minister, Dr Nigel Clarke says no, we’re not there yet.

In an interview with the Jamaica Observer, Clarke pointed out that some companies and individuals did not file their taxes on time. That means there’s still money out there to collect. But it’s up to Tax Administration Jamaica to follow up.

Plus changes to the International Financial Reporting Standards (IFRS), caused several financial institutions to declare lower taxes.  IFRS is a set of international guidelines on how companies report their accounts. We’ve been talking about the changes to the IFRS standards and Basel Three for a while, and now we’re starting to see the real-world impact of those changes.

According to Dr Clarke, though, this is the name of the game. Over, or in this case, underperformance in tax revenue is expected. He said it’s how the government responds that will matter.

The Minister said they’re keeping a close eye on the tax revenue. He said IF the revenues don’t pick up the Government can tap into other revenue possibilities without placing an extra burden on taxpayers.

What other revenue options do they have?  He didn’t specify, but the government typically gets other revenue from grants and loans.

And that’s the bottom line.