PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

5.0 Expected Outcomes
These measures are expected to provide strong incentives for:
a revitalization of the market for corporate debt
increased competition for loanable funds
further reductions in the cost of capital for financing productive activity.
There are likely to be revenue losses which, from a programmatic perspective, would
need to be accurately quantified and included in the GOJ’s macroeconomic programme.
However, in light of existing knowledge, we conjecture that, while total revenues from
stamp duty and property transfer taxes combined have, typically, been estimated to
account for 3% - 5% of total revenues, the bulk of these revenues is likely to arise from
transactions in real assets (land). That is, given the low level of activity in corporate debt
markets, it is unlikely that such transactions provide significant revenue yields for stamp
duty and property taxes. 57
Previous studies have suggested that the negative revenue effects of reducing stamp duty
and property taxes may be offset by the suitable application of a capital gains tax. We do
not recommend compensatory changes in capital gains taxes, and for the following
simple reason. Capital gains taxation reduces the after-tax returns to investors holding
the financial instrument being taxed. In addition, the international experience strongly
suggests that additional revenue yields from increased capital gains taxation are low,
while administrative costs are high relative to other types of taxes, not least because of
the difficulties involved in measuring capital gains for tax purposes.
57 The revenue loss from harmonizing the tax treatment of unit trust and mutual fund shares is even more
debatable given that, currently, there are no local mutual funds in operation.
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