Tax in­cen­tive law passed amid de­bate over avoid­ance

Jamaica Gleaner - - NEWS - Ed­mond Camp­bell Se­nior Staff Re­porter >> See full story at www.ja­maica­gleaner.com ed­mond.camp­bell@glean­erjm.com

A SE­NIOR op­po­si­tion spokesman’s claims that some long-es­tab­lished com­pa­nies list sub­sidiaries on the Ju­nior Market of the Ja­maica Stock Ex­change to avoid taxes were yes­ter­day chal­lenged by the Gov­ern­ment as law­mak­ers passed leg­is­la­tion to con­tinue the tax in­cen­tive to firms listed on the ex­change.

In his con­tri­bu­tion to de­bate on leg­is­la­tion to amend the In­come Tax Act, Dr Peter Phillips, op­po­si­tion spokesman on fi­nance, said tax avoid­ance con­sid­er­a­tions seem to have loomed large as against a move to gain eq­uity.

“These com­pa­nies have, in some in­stances, spun off sub­sidiaries con­nected to these ven­er­a­ble par­ents that in or­der to se­cure tax re­lief rather than be­cause of any press­ing need for new eq­uity ex­pan­sion,” Phillips as­serted.

“In a num­ber of cases, star­tups that are es­sen­tially fi­nan­cial ser­vices op­er­a­tors backed by long-es­tab­lished cor­po­rate play­ers have taken ad­van­tage of the in­cen­tive and put en­ti­ties in place that en­joy a sig­nif­i­cant com­pet­i­tive ad­van­tage in the sec­tor against other play­ers be­cause the other play­ers are be­ing taxed at the rate of 33 per cent in the reg­u­lated sec­tor,” Phillips in­sisted.

He noted that the point had been made by var­i­ous com­men­ta­tors, as well as the In­ter­na­tional Mon­e­tary Fund, that the coun­try would be bet­ter served if it gave tax-free ben­e­fits to in­vestors rather than to com­pa­nies seek­ing to avoid taxes.

DE­SIGN IN­CEN­TIVES

“What we need to do with both the se­nior and ju­nior ex­changes is to de­sign a mech­a­nism that pro­vides an in­cen­tive to the peo­ple who want to in­vest and be­come par­tic­i­pants in the ad­ven­ture of eco­nomic growth,” he added.

How­ever, state min­is­ter in the Min­istry of Fi­nance and the Public Ser­vice, Fay­val Wil­liams, dis­missed the claim by Phillips that the ma­jor­ity of com­pa­nies have sought to raise min­i­mum cap­i­tal, which sug­gested tax avoid­ance con­sid­er­a­tions.

“We want to em­pha­sise that the strings at­tached to the tax in­cen­tives are strong. The com­pa­nies must stay listed, as any taxes fore­gone would be clawed back, and even af­ter the in­cen­tive pe­riod ends, the com­pany has to stay listed for at least five years, so they can­not leave af­ter the in­cen­tive pe­riod with­out penal­ties.

WIL­LIAMS

PHILLIPS

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