Two tax measures announced by Minister of Finance and the Public Service Audley Shaw in his budget speech in April and is expected to cost the government just over $700 million in revenues in 2008/2009, took effect yesterday.

The second adjustment to the Income Tax Threshold for the financial year 2008/2009, increased the current threshold of $200,304 to $220,272 as of yesterday, costing the government $575 million in revenues.

In addition, the withholding tax on dividends (tax levied on income from securities), payable by local registered companies to their shareholders, was removed yesterday to create a more equitable tax system. This will reduce revenue inflows by a further $130 million.

The increase in the threshold will see individuals benefiting from a tax-free income of $18,356 monthly, $8,472 fortnightly or $4,236 weekly. The threshold was increased in July, 2008 from the previous $193,440 mark.

Employers have been reminded to make the necessary adjustments to their payroll system to reflect the increase in the threshold, so that their employees may benefit immediately.

In addition to employees, all individuals resident in Jamaica, whether self-employed or pensioners, will also benefit from the increase in the threshold.

The removal of the withholding tax on dividends will be welcomed by most companies, including large ones which suffer cashflow problems when their subsidiaries pay the tax to holding companies.

Shareholders, however, are required to include the dividend income in their income tax returns, while non-residents will continue to pay withholding tax on dividends that they receive.