THE Carreras Group, the parent of the Cigarette Company of Jamaica, will, beginning January 1, 2004, take over the manufacturing of cigarettes from its subsidiary – all but completing the de-conglomeration of the group into a single-product, single-entity enterprise.

The move, announced yesterday, is apparently intended to foreclose on any possible future tax claims by the Commissioner, Taxpayer Audit & Assessment, against the group – with Carreras currently fighting a $5.7-billion tax claim made against it earlier this year by the authorities.

In a press statement yesterday, Carreras made no reference to its ongoing dispute with the commissioner, but noted that beginning January 1, 2004, the employees of the Cigarette Company of Jamaica “will be transferred to Carreras Group Limited on identical terms to their current terms of employment”.

Carreras owns over 90 per cent of the Cigarette Company of Jamaica.

To effect the changes, Carreras says it will purchase all the fixed assets used by the Cigarette Company – located at Twickenham Park in St Catherine – to produce and distribute cigarettes and tobacco products. Carreras will repossess the ‘Craven A’ and ‘Matterhorn’ trademarks from its subsidiary.

“The Cigarette Company of Jamaica has accepted an offer from Carreras Group Limited to purchase all of Cigarette Company of Jamaica’s fixed assets,” said the late afternoon press statement. “As of 1st January, 2004 all cigarettes and other tobacco-related products distributed by Cigarette Company of Jamaica Limited will be distributed by Carreras Group Limited.”

Carreras has moved to head off any future tax claims by the authorities, even while publicly committing to fight, in court, the demand made by them for it to pay over $5.7 billion in principal, interest and penalty.

The tax authorities are arguing that monies the Cigarette Company of Jamaica advanced Carreras Group between 1997 and 2002 should have been treated as dividend distribution rather than loans – as the company has insisted they were. As dividend distribution, the payments would attract taxation at a rate of 33.33 per cent.

Whatever the outcome of this dispute, what is clear is that once the highly profitable cigarette-making operation is undertaken directly by Carreras, the issue of money transfer and taxation will not arise.

This latest change also represents the final stage in a decade-long move by Carreras to sell off non-tobacco assets – the final outcome of which has been the redundancy of the group structure.

For example, Carreras has already divested its biscuit manufacturing enterprise, closed down its printery and has placed its hotel, San Souci on the market for sale.

Carreras, with over $15 billion in stockholders equity, is among the top three most profitable companies listed on the Jamaica Stock Exchange.