The creation of the Tax Administration of Jamaica (TAJ) and the reduction of tax expenditures have improved Jamaica’s tax collection and progressiveness. Tax revenue as a percentage of GDP has increased in recent decades and is above the regional average. However, the country’s tax system still has low levels of revenue collection relative to public expenditure needs. 

The informal economy, the high tax-free threshold and tax expenditures, and the progressiveness of the tax structure explain the limitations of the tax system and present problems that need to be addressed. In this paper, we propose a review of the limitations of Jamaica’s national tax system and explore potential reforms, such as expanding the narrow tax base, increasing the GCT, reducing the CIT employment tax credits and increasing the NIS contributions.

However, because the political economy of tax reform is as important as the reform itself, we include scenarios that balance the potential revenue and progressiveness gains with the political costs of such an endeavor. The two proposed reform packages are intended to help policymakers identify potential ways to improve tax collection.