My Thoughts on Technology and Jamaica: Min. of Finance, Dr. Peter Phillips to implement ATM Withdrawal Tax - Jamaica's Unbanked means Cashless Society coming with Digicel Mobile Money

Sunday, April 27, 2014

Min. of Finance, Dr. Peter Phillips to implement ATM Withdrawal Tax - Jamaica's Unbanked means Cashless Society coming with Digicel Mobile Money

“This levy will be chargeable on all withdrawals from deposit-taking institutions by way of electronic Banking, point of sale transactions, cheques, automated Banking machine (ABM), automated teller machine (ATM), or over the counter and Internet transfers”

Minister of Finance, Dr. Peter Phillips, commenting on the planned ATM Withdrawal Levy coming in effect on Sunday June 1st 2014

The 2014/2015 Budget reading by Minister of Finance, Dr. Peter Phillips has not been a pleasant one. First, it appears we’re gonna get hit by a ATM (Automated Teller Machine) Withdrawal Tax or Levy as announced in “Government taxes Bank withdrawals”, published Friday April 18, 2014, The Jamaica Gleaner and “Govt's plan to raise $6.7 billion”, published Friday, April 18, 2014 5:24 PM, The Jamaica Gleaner

The measure as announced by the horses’ mouth by the JIS (Jamaica Information Service) in “Measures Outlined to Raise $6.7 Billion for Budget”, published April 18, 2014 By Alecia Smith-Edwards, The Jamaica Information Service  is expected to provide some JA$2.25 billion to contribute to the JA$540.1 billion Budget, which breaks down as thus:

1.      JA$540.1-billion budget
2.      JA$421.2 billion in projected revenues and grants
3.      JA$118.9 billion short of their goal

To plug that gap of JA$118.9 billion, Minister of Finance, Dr. Peter Phillips is getting creative with the taxes and borrowing:

1.      JA$110 billion in International loans (read IMF, et al)
2.      JA$1.4 billion in Local Bank Loans
3.      JA$6.7 billion from new Taxes (read the ATM Withdrawal Tax, et al)
4.      JA$2.25 billion of the JA$6.7 billion from new Taxes is from the ATM Withdrawal Tax

According to Minster of Finance Dr. Peter Phillips, the Tax, to be implemented on Sunday June 1st 2014, is structured as follows:

1.      JA$1,000 withdrawals will have to pay JA$1.00 in taxes
2.      JA$1,000,000 to JA$5,000,000 withdrawals will have to pay 0.09% in taxes
3.      JA$5,000,000 to JA$20,000,000 withdrawals will have to pay 0.075% in taxes
4.      JA$20,000,000 withdrawals will have to pay 0.05% in taxes

No surprise there, as the recently concluded CaPRI (Caribbean Policy Research Institute) study confirmed what CAC (Consumer Affairs Commission) has been saying all along based on customer complaints; Banks have been profiting from increasing Bank fees as stated in “Local Banking Fees In Keeping With Western Trends - Study”, Published Monday April 7, 2014 10:06 am, The Jamaica Gleaner.

The ATM Withdrawal Tax as it’s so called is really a Levy (but who cares right?) and extends to all forms of withdrawals, except between Accounts owned by the same persons at the same financial institution. Basically it includes:

1.      Electronic Banking
2.      POS (Point of sales) Transitions
3.      Cheques and Withdrawals at ABM, ATM or ETM
4.      Over the counter i.e. Bank, Withdrawals
5.      Internet Bank transfers

Opposition Finance Minister Shaw Upset – Tax Really only affect affluent members of CAPI

Of course, many oppose this measure, as, really, nobody likes being taxed, worse from Bank Withdrawals and even worse POS transactions. Especially as many Jamaicans already use Credit Card and play catch-up with their Debit Cards to pay off the balance before they are due each month.

Opposition Finance Minister Shaw is on the warpath, claiming that this Tax is merely the Government using the CaPRI Study to justify introducing another Tax as stated in “Shaw criticises govt's tax on withdrawal from Banks”, published Friday, April 18, 2014 9:13 AM , The Jamaica Observer

So too is CAPI (Citizens Action for Principle and Integrity), an activist group made up mostly of affluent returning residents, expatriates and Business people I.e. Middle class, who called the ATM Withdrawal Levy “unconscionable and oppressive” to quote the newspaper byline in the article “Tax on withdrawals 'unconscionable and oppressive', says CAPI”, published Friday, April 18, 2014 8:20 PM, The Jamaica Observer.

But the truth be told, the Minister of Finance, Dr. Peter Phillips, is living up to his doctorate. A study was done that confirms beyond a shadow of a doubt that the Banks are tapping into Banking fees to make more money, raising Withdrawal fees by as much as 115% from JA$100 to JA$215 as is the case with NCB (National Commercial Bank) Withdrawals.

Thus knowing that Jamaicans are hooked to this means of getting and spending their money due to its convenience, it makes only sense to Tax what are inelastic sources of Taxable Revenue, that being the very act of spending your money. If it's good for the Goose (Banks), then it must be good for the Gander (Government of Jamaica)!

For once, no-one can criticize the GOJ (Government of Jamaica) for ignoring a scientific study from CaPRI that confirms and anecdotal observation by another institution, the CAC. It’s scientifically sound and logical, which is why I’ve decided to pen this article.

ATM Withdrawal Tax affects the Wealthy – 34% of Jamaicans are still unBanked

This ATM Withdrawal Levy only affects the very wealthy (read CAPI) who have large deposits of cash from which they make interest from Investment Accounts. It’s for this reason their attempt at a protest by having Jamaicans wear black as noted in “CAPI Plans Black Friday To Protest Withdrawal Tax”, published Wednesday April 23, 2014 3:22 pm, The Jamaica Gleaner and “CAPI: Wear black tomorrow against proposed ABM tax”, published Thursday, April 24, 2014, The Jamaica Observer fell short.

Hardly anyone showed up as noted in “Moderate participation in Friday’s ‘wear black day’”, published Saturday, April 26, 2014 4:57 PM, The Jamaica Observer, as Friday is TGIF (Thank God it’s Friday) and coincidentally, payday for many persons with bills to pay. To stop and display placards or even wear black was a bit much for many Jamaicans who simply use a Bank Account to receive pay or encash cheques (that’s me!!).

Many, like myself, prefer to be paid in my hand in cash, despite having a Bank Account, as I’ve been dodging Bank Fees since 2012! Worse, John Public, the average Jamaican, doesn’t dabble much in Bank Accounts as noted from the UWI Stats researched by Director of the Centre of Excellence of the Mona School of Business, Dr Maurice McNaughton presented by Minister of State in the Ministry of Science, Technology, Energy and Mining, Julian Robinson that state:

1.      34% of Jamaicans above 18 years do not own Bank Accounts
2.      66% of Jamaicans above 18 years own Bank Accounts
3.      12% of Jamaicans above 18 years who own Bank Accounts have Debit Cards attached and use them actively for Transactions
4.      80% of adult Jamaicans have limited access to low-cost, efficient and user-friendly Banking Services

If true, then it means only PAYE (Pay as You Earn) as well as Investors with large sums of money that they make interest from will be affected. Worse it they are a part of the 80% with limited access to Banking facilities and then they’d mostly pull all their money all at once.

A trip to the Bank is not a pleasant thing to endure. Especially one to which they have limited access wastes a good part of the day standing in line at the ATM and in lines in the Banks, costing the PAYE Worker time and money

Just to repeat that, even the PAYE’s hardly use their Bank Accounts; as soon as the pay reaches into their Bank Accounts, it’s all spent to cover living expenses and bills. So the real targets are those people in society that make money via investment Banking usually dabbling in sums of money larger than JA$1,000,000 on average.

This is a Tax on the Rich People for whom a Bank or Investment Account is a means of making money from Government Paper, CD (Certificates of Deposits) and US Dollar Denominated Investment Accounts that may be a mixture of high-risk Stocks, Mutual Funds and Government Bonds!

Cashless Society is coming – Digicel Mobile Money will make Digicel the Bigger, Better MoneyMachine

But the real power of this measure is that it would eventually lead to all Jamaicans being forced to do all their Transactions via a Bank Account, possibly a Mobile Money Account as predicted in my blog article entitled “BOJ to regulate and approve Mobile Money Industry in Jamaica - JCCUL JCUES is the Man of Steel as GraceKennedy joins The Last Stand for a Cashless Society”, making all Financial Transactions easily traceable and thus taxable.

I suspect this coming of Mobile Money to receive and Spend Remittances may be real reason why NCB parted company with MoneyGram and began rolling out their Network for Bank on the Go iABM Machines that can read Cash.

Already many are anticipating this, with even Telecom Provider Digicel making plans to throw their hat into the Ring and launch their own Mobile Money Service as well to compete against the likes of GraceKennedy and NCB (National Commercial Bank) as stated in “Digicel To Roll Out E-Money Service In Jamaica”, Published Wednesday April 23, 2014, The Jamaica Gleaner, an announcement deserving of an article in its own right.

Good move by the Minister of Finance, Dr. Peter Phillips, as he’s set the stage for a Cashless Society by 2017, which by the way is also an IMF (International Monetary Fund) recommendation to increase Tax revenues. Now all he has to do is to get more Jamaicans to use Bank Accounts for all their transactions by implementing a Cashless System, such as Mobile Money as a mandatory means of doing transactions and outlawing Cash Transactions with heavy fines. 

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