Jamaica - Politics, government, and taxation

As a member of the British Commonwealth, Jamaica's government follows the Westminster Parliamentary model. The British queen is represented by the governor general, who acts as head of state, while the prime minister serves as head of the government. Voters elect members of the House of Representatives, and the leader of the majority becomes the prime minister.

Since earning its independence from England in 1962, Jamaica has been governed alternately by the 2 major political parties, the left-leaning People's National Party (PNP) and the more conservative, pro-business Jamaica Labour Party (JLP). Unlike in the United States, where transitions between the 2 major parties have not marked major swings in policy, Jamaica's 2 parties have often offered conflicting programs for managing the economy and have resorted to violence in opposing each other. Throughout the 1970s and 1980s, both parties aligned themselves with rival gun gangs and fought their political battles in the streets as well as at the ballot box. The taint of political violence has touched nearly every election in Jamaican history. In 1995 a new party, the National Democratic Movement (NDM), broke onto the political scene.

From 1972 to 1980 the PNP, under prime minister Michael Manley, adopted democratic socialism as its ruling platform and instituted state control over economic activities. The PNP had little success, as the widespread prosperity of the 1960s gave way to high inflation , unemployment, and great civil unrest and violence. During the 1970s Jamaica became a debtor nation and has remained so ever since. The more conservative JLP won control of the government in 1980 and maintained power until 1989. This pro-business party, led by Edward Seaga, withdrew state control from many industries and encouraged closer economic ties with the United States. Such controls were encouraged, even demanded, as a condition of loans made by the World Bank and the International Monetary Fund (IMF). Under Seaga, the economy recovered some of its strength. Nevertheless, Seaga's implementation of austerity measures demanded by the IMF as part of Jamaica's debt maintenance eroded his popularity, and in 1989 the PNP returned to power, again under the leadership of Manley. After Manley's retirement in 1992, Percival J. Patterson assumed the position of prime minister and led the party to an unprecedented third consecutive victory in the 1997 elections.

With socialist economic principles largely discredited by the collapse of the Soviet Union, the PNP generally continued the pro-business programs of the JLP in the 1990s. A crisis in the financial sector which shook the Jamaican economy between 1994 and 1996 prompted the PNP to place this sector under close government supervision, raising fears that the party was returning to more state control of the economy. Yet the PNP's efforts did little to correct the poor health of the economy—as measured by mounting government debt, little or no growth in GDP, continued high inflation rates , and the declining value of the Jamaican dollar—and could not contain rising levels of street violence and the drug trade. Though analysts expect that the Jamaican economy may begin to rebound in 2001, it may be too late for the PNP to maintain power.

The major source of government revenue comes from taxes. According to the U.S. State Department Country Commercial Guide for 2001 , 36 percent of Jamaica's revenues come from income tax , 20 percent come from a value-added tax , and the remainder from customs duties and other sources. The highest marginal tax rate on Jamaican taxpayers stood at 25 percent for incomes over US$2,712 in 1999; while the tax rate percentage is low compared to other countries, the level of the income taxed at this rate is also quite low, which means that a fairly high percentage of Jamaicans are taxed at the highest rate. The highest marginal tax rate on corporations in the same period was 33 percent. Customs taxes are collected under the Common External Tariff (CET) policy enacted by the CARICOM (Caribbean Common Market). The CET is intended to encourage trade among Caribbean nations by placing a tariff of between 0 and 30 percent on goods imported from outside the CARICOM.

The declining value of the Jamaican dollar forced the government to increase the burden of taxes on the Jamaican public. During the financial crises of the late 1990s, the government raised the tax rate on such goods as gasoline, cigarettes, and alcohol, sparking widespread protests. When the government raised taxes on petroleum products in April 1999, for example, riots paralyzed the island for 3 days. To stop the violence, the government reduced the tax increases.