Pengelley calls for 10% tax rate on Junior Market

Pengelley calls for 10% tax rate on Junior Market

BY KARENA BENNETT Business reporter

Thursday, January 29, 2015

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PRESIDENT of the Jamaica Manufacturing Association (JMA) Brian Pengelley is calling on Government to consider a 10 per cent tax rate for companies looking to list on the Junior Stock Market.

Up to two years ago, Pengelley was a part of the Private Sector Working Group (PSWG) led by then president Joseph M Matalon, which supported the removal of waivers across much of the economy, including the junior market, in an effort to raise total taxes to Government.

The junior stock market currently provides a 10-year tax benefit structure — five years free of corporate income tax followed by five years of half tax — for listed companies, and acts as a major incentive for companies to go public. However, last year the Government announced that it would remove the tax incentive effective March 2016.

"Let me first say that we were a part of the Incentive Working Group that signed up and recommended the change in the junior stock market," Pengelley stated during the JSE Investment and Capital Market Conference, at the Jamaica Pegasus Hotel last Thursday. "But the strength of any leader must be that you go back and review to see the decisions made, what the current realities are in your economy, and whether we made a good or bad decision."

He stated that the tax incentive provided to manufacturers listed on the stock exchange has assisted in the expansion of their operations. He added that manufacturers have been investing in new products, and continue to pay tax in the form of general consumption tax (GCT) to the government.

"We have seen major investment in technology. Technology does not come cheap and if you are going to survive in the world as a manufacturer, you need technology to compete. So the JMA is calling for that to be reviewed again because things are changing. It (the removal of the tax incentive) is not working well for us," Pengelley told the audience.

Pengelley's call for a review comes on the heels of possible reconsideration from the Private Sector Organisation of Jamaica (PSOJ), who up to last November was in favour of the removal of the tax incentive on the junior market. Chris Zacca, who was then president of the PSOJ, informed the Jamaica Observer that they had not taken a formal decision on the matter, but there was a certain number of influential business people who felt that the PSOJ should look back at the junior stock exchange as an example of how to get growth in business by the removal of regulation and reduction of taxation.

Zacca stated that the tax incentive has encouraged the expansion of a number of businesses, and indicated that a review of the recommendations may be necessary.

"I understand that there are considerations that led to some of the decisions that were made, but I put it to you that we need to look at the implications. It may not be completely tax-free; maybe there is some other mechanism that we could put in place. I know the government faces huge challenges today with revenue, cutting cost, managing taxes, but let's find a way," Pengelley said.

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