The Senate passed a number of amendments to the Income Tax Act Friday, despite strong criticisms from Opposition members that the changes are disincentives to production.

The Government says that the amendments are necessary in recognition of a need for more effective regulating of long-term saving instruments. But Opposition senators claimed that they were bureaucratic, mostly unnecessary and, in effect, a mini tax package.

However, the Government used its majority to pass the bill. The measures have already been passed in the House of Representatives.

Explaining the provisions of the bill, minister of foreign affairs and foreign trade, Senator Anthony Hylton, who piloted the measures, explained that they sought to:

. remove the tax credit granted to a body corporate on the issue of bonus shares;

. require that tax-free, long-term instruments should be kept in Jamaican currency;

. require that prescribed persons must be approved by the minister in respect of the use of tax-free instruments relating to long-term savings, prior to the instrument being offered on the market;

. increase premium tax on premium income from one-and-a-half per cent to three per cent, and, in the case of non-regional insurance companies, from two per cent to four per cent;

. allow for the rate of tax on investment income, in relation to insurance companies, to be increased from seven-and- a-half per cent to 15 per cent; and

. make permanent the taxes which are now collected under the provisional collection of tax act.

Hylton noted that in 1994, a 25 per cent tax credit on bonus shares was granted to strengthen the financial base of companies, given the relatively high cost of loan financing then.

“The aim was to assist companies, with difficulties in obtaining working capital, to finance themselves from profits rather than loans,” he said. “Since then, many local and foreign-owned companies have listed on the Jamaica Stock Exchange and the rate of income tax on dividends income is now reduced.”

He recalled that the reduction was done on a phased basis, over the period June 1, 2000 to April 2002, as an incentive to encourage the movement of fixed income securities into the equity market.

Accordingly, he said, the bill seeks to remove the income tax credit towards a company’s tax liability on the issue of bonus shares, while shifting the incentives to shareholders by way of the exemption of income tax payable on dividend income derived from companies listed on the stock exchange.

But the Leader of Opposition Business, Senator Anthony Johnson, felt that the amendments formed a mini tax package.

“I am extremely surprised that the Government would have come in this manner, with what is in effect a mini tax package at this time,” said Johnson. “I am even more surprised at the method, because this matter ought really should have gone to a joint select committee, which would have required various industrial sectors, as well as the public, to make submissions.”

According to Senator Johnson, “whenever you deal with these critical and sensitive levers, you do not simply come up with them out of the blue, or do it in a manner which leaves critical areas of industry at a loss for their response”.

He felt that the amendments should have been advertised and the stakeholders, as well as the public, encouraged to “come to the bar and tell us what are their views”.

Opposition spokesperson on industry, commerce and investment promotion, Senator Shirley Williams, said she found the amendments “bureaucratic and very unnecessary” and a disincentive for people to save.

She said that while the JLP supports tax-free status on dividends for persons listed on the stock exchange, she couldn’t understand why it is restricted to those listed on the stock exchange, which are the minority of companies.

“We could never be saying that we are business-friendly… I object to the removal of the tax credit on bonus shares for small, medium and other entities that do not enjoy the benefit of tax-free status on their dividends by virtue of not being listed on the stock exchange,” said Williams.

She said that she found the amendments “oppressive to business and a disincentive”, especially in light of hundreds of thousands of persons either listed as unemployed or not seeking work.

“I do not care what definition you wish to put on it, the fact of the matter is that you should be bringing to this table measures to encourage us to go into business, that is what I expected to see here,” said Williams. “It is with regret that I say I support none of these amendments. They are a disincentive, they are bureaucratic and they are unnecessary, in some instances.”