JSE boss suggests stakeholders’ arguments weighed in Gov’t decision on Junior Market
BY JULIAN RICHARDSON Assistant Business Co-ordinator email@example.com
THERE are indications that Government may have had a late change of heart in deciding the fate of the existing incentive scheme on the Jamaica Stock Exchange (JSE) Junior Market.
Junior Market stakeholders up to a month ago expressed discontent over what they said were plans to gut the market of the present 10-year tax benefit structure -- five years free of corporate income tax followed by five years of half-tax -- believed to have fuelled its rapid growth and general economic development over the last four years. Finance Minister Dr Peter Phillips on Tuesday, during a statement in the House of Representatives on the Omnibus tax incentive legislation, announced a phasing-out of the benefits starting in January and ending in December 2021.
Companies listed on the exchange prior to January 1, 2014 will continue to enjoy their current benefits for the remainder of their unexpired incentive period, while firms that list between January 1, 2014 and December 31, 2016 will only be entitled to full relief from income tax for five years.
But JSE general manager Marlene Street-Forrest told Caribbean Business Report that while the exchange would have preferred if the market continued in its current state, there are indications that it benefited from considerations arriving out of eleventh-hour meetings between the JSE and Government stakeholders.
"I think our argument was considered. It obviously was factored into the final decision based on where we understood the position was to the position that was arrived at," Street Forrest said.
"We can say that there was some preservation of some aspects of (the Junior Market)," she added.
After JSE stakeholders expressed disappointment that they were not consulted by the incentive working group (IWG) that made the recommendations on the Junior Market amendments, a meeting was organised with the IWG, to whom they provided empirical data on the success of the market and the imperative for growth.
Street Forrest said
she understands the government's position within the context of
the broader economic picture, and remains positive about the benefits still available to companies on the Junior Market.
Against the background of a cash-strapped Jamaican government, the Omnibus Tax Incentive bill is a key element in fulfilling the International Monetary Fund agreement. The bill aims to establish a transparent and coherent regime to govern all tax incentives, and will also eliminate ministerial discretionary powers to grant tax relief.
"The incentives were given by the Government and ithey were gven based on certain objectives to be achieved. Based on the Government's other objectives they have seen it fit to amend the incentives, so as a stock exchange we acknowledge that that has be the course that has to been taken," she said, adding that "we know that the incentives worked in terms of the country's growth agenda and we continue to encourage companies that, despite the amendment, that they should still seek the market as a way of growing their companies, ensuring that there is longevity for their companies and accessing all the other benefits available to companies that are listed on the market."
It was a similar view expressed by Ian Kelly, director of finance at distribution company Derrimon Trading, which
is expected to list on
the Junior Market before year-end.
"My personal position on the minister's presentation is that the country is at a crossroads and as a result, there are some measures that have to be taken," Kelly told this newspaper.
"I think the broadening approach that has been presented by the minister represents a mechanism of dealing with the growth and bringing some equality to our tax system," Kelly continued. "I personally feel that while the phasing-out has been placed on the table it is not complete because there is still an option for persons who want to list on the JSE after December 31."
Indeed, for at least one company that was considering listing after December 31, the amendment is not a detterant, even if it is a little disappointing.
"It's not the ideal announcement for us. The JSE Junior Market was
a savior for entrepreneurship in Jamaica. It's one of the few initiatives we've seen that had an immediate impact on job creation and growth of businesses," said Tyrone Wilson, CEO of eMedia Interactive, a new media company that operates an online television network.
"Though I had hoped that the Government did not interrupt the current structure of the market, I however understand the situation we're in as a country and the need for structure and reform," Wilson said, noting, however, that "the new JSE Junior Market incentives won't have a major impact on our plans for listing eMedia Interactive in the near future".
eMedia stated in 2012 that it intended to list in three years.
Meanwhile, Gary Peart, the CEO of Mayberry Investments, which has acted as lead broker for the bulk of the companies that have so far listed on the Junior Market, opted to reserve comment as he wished to see the full presentation of the Government's plans. However, he stated that the company plans to list at least two companies, including Derrimon, on the market before year-end.
"We can only focus on what is in front of us right now," Peart said.
Street-Forrest said she expects up to four more companies to list this year.
"I expect three companies and possibly another to come to market before the year-end," the JSE general manager said.