Positioning Jamaica for growth: A business-friendly environment


David Mullings

Sunday, May 27, 2012

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The highly anticipated presentation by the present Administration on how it will finance one of the largest budgets to date (in nominal terms) has now passed and the debate has begun. There was no doubt that additional taxation was going to be a feature, but I am thankful that a number of initiatives have been outlined that help to position Jamaica for growth, especially with regards to the private sector.

While the Private Sector Working Group on tax reform (PSWG) had called for the corporate tax rate to be reduced to 15 per cent from 33.3 per cent while keeping the higher rate for special groups, namely financial institutions and phone companies, the Government has lowered it to only 25 per cent, while keeping the other part of the recommendation. This is still a positive move because businesses can now allocate more capital to areas such as productivity improvement for staff, hiring additional staff, retooling and research and development, areas that contribute to economic growth.

The PSWG had also called for minimum income tax for registered companies, whether or not they were profitable, of $100,000 per year. The Government has seen fit to implement this, but at $60,000. This, of course, is a burden on the business community but more importantly, it will help to reduce the numbers of dormant companies that are registered and the number of companies not filing tax returns. Only some three per cent of registered companies actually pay taxes.

I was unable to get more details in time for my column with regards to reform to make it cheaper and easier to wind up a company in Jamaica. Having gone through registrations of more than one company in Jamaica, I am well aware of how much more complex it is than when I register companies in Florida where I am based. This is why Jamaica ranks so poorly on the Doing Business Index.

If a minimum income tax is going to be out in place, then it is only fair to make it easier and cheaper to wind up a non-performing business. Becoming more business-friendly is imperative to achieving growth. In 2011, PricewaterhouseCoopers Jamaica published Tax Reform -- can we rise to the challenge? and spoke to business-unfriendly provisions.

"GCT-registered taxpayers cannot claim GCT incurred on materials used in the construction or repair of their business premises (so they must absorb the GCT as an additional cost)." They then pointed out that hotels are actually excluded from this provision, which is really a disincentive to everyone else. Such a provision should be removed entirely if Jamaica is serious about creating a business-friendly environment.

These are the things, along with amended bankruptcy laws, that would spark a new thrust of serious entrepreneurship in Jamaica. An older friend recently told me that they have great hope for my generation when it comes to entrepreneurship because we were not part of the financial crisis in the 1990s.

With updated laws that create a more conducive business environment entrepreneurship would see a dramatic increase, Jamaica would rank better on the index, thus attracting more investment, and the economy would see real measurable growth that benefits everyone.

All countries that have turned around their economies have created better business environments and Jamaica has many case studies to look at, including Singapore, Costa Rica, Brazil and India.

Economic success is directly related to the business environment that exists in a country and we should make this a real priority.

David Mullings was the first Future Leaders representative for the USA on the Jamaican Diaspora Advisory Board. He can be found at facebook.com/InteractiveDialogue and Twitter.com/davidmullings




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