Taxing, To Say The Least

Jamaican payroll taxes are a confusing mish-mash of multiple statutory deductions, nil rates that change with political whims, differing percentages of contributions and little or no public education on how the process works. Why do I believe that it is confusing on purpose as a way to allow working Jamaicans to be samfied (tricked)?

Since January 2006, Jamaican workers have been allowed to earn up to JA$193,440 annually (approximately US$2,764) without paying Income Tax (AKA PAYE or Pay As You Earn).

That seems pretty straight forward, nuh true?

If it were only so simple.

First there is a deduction called NIS or National Insurance Scheme that is paid by employers and employees at 2.5% of the first JA$500,000 earned, with a monthly cap of JA$1,041.66. That amount must first be deducted from the gross emolluments before applying the nil rate. If employed Jamaicans reach the age of 70, this deduction ceases the following calendar year.

Next step is to determine the cumulative nil rate based on where in the calendar year you are and whether or not there were any nil rate earnings from another employer during the calendar year. Now you deduct that amount from the gross amount less the NIS deduction and any pension deductions. That gives you the TAXABLE income for the PAYE deduction.

The PAYE tax rate is 25% of the TAXABLE income for individuals.

The Education tax is also calculated on TAXABLE income at the rate of 3% for the employer's contribution and 2% for the employees' contributions.

Then we have the NHT or National Housing Trust deduction that is paid at 3% of the gross amount by employers and 2% by employees. This ceases the calendar year after employed Jamaicans reach the age of 65.

Employers also have to pay a HEART (Human Education And Resource Training) contribution at the rate of 3% of the gross employee pay.

So we have five statutory deductions, (PAYE, HEART, Education, NIS and NHT) that have varying percentages, one with a capped amount and some that are applied against the gross amount and some that are applied against TAXABLE income.

Is it any wonder most Jamaican employees have no idea if they are being paid correctly or not?

I won't even make mention about the heartless employers who withhold statutory deductions from their employees' pay, but never hand it over to Inland Revenue. (OK, so I did make mention of di rahtid teef, dem.)

The reason I mentioned any of this nonsense is that I will be doing the programming changes for a nil rate threshold change for July 1, 2008 and again for January 1, 2009 for several of my clients.

Thank you, Jah, for gift of beading that helps restore my sanity in the midst of this insanity.