FOLLOWING a reported J$9 billion in taxes being levied against it this financial year, Carreras is threatening to withdraw its support from some local charities and community development programmes in Jamaica if the current level of taxation continues.

“The recent decision by the government to once again increase the tax burden of companies like Carreras is bound to affect the scope and depth of our community engagement,” Christopher Brown, Head of corporate and regulatory affairs, Carreras said at the Annual Conference of the Council of Community Colleges of Jamaica held at the Jamaica Grande, Ocho Rios yesterday. “I would like to take this opportunity to ask the government to think again and consider whether or not it will be able to take over the community development programmes which will inevitably fall by the wayside without sustained investments of the type provided by companies like Carreras,” Brown warned.

Carreras, has had to endure heavy taxation in 2009 following two increases in the Special Consumption Tax (SCT) on cigarettes by the government last year. Government announced on December 17, 2009 that the SCT on cigarettes would be increased effective January 1, 2010 from $8,500 per 1,000 sticks to $10,500 per 1,000 sticks — a measure which it said would yield $1.4 billion in revenue, 20 per cent of which would go towards the National Health Fund. This followed a 23 per cent increase in 2007, a 100 per cent increase in 2008 and 42 per cent increase in May 2009. In its June 30, 2009 financial results, the board of Carreras revealed that the May increase in the SCT resulted in a 20.9 per cent decline in sales volume.

“Today, when most persons think about our company, what immediately comes to mind is the very high level of taxes that we pass into the government’s coffers each year, estimated to be in excess of $9 billion for this financial year,” Brown said. However, he highlighted that Carreras’ contribution to Jamaica “extends beyond the payment of taxes”. He noted that the company, has, since its inception in 1962, become a “major provider of community development” services and a partner in community development “through health, agriculture, general community development and education.

Carreras is a major sponsor to sporting and educational endeavours

Outlined in his speech was the contribution that the cigarette company had made to numerous Jamaican charities including sponsorship of sports and education. Brown said that Carreras had made significant contributions in its over 40 years in Jamaica to charitable and community efforts including Premier League Football and national cricket through the Carreras Sports Foundation; The University of the West Indies Centenary endowment Fund, JAMAL (now Jamaica Foundation for Lifelong Learning), The National Dance Theatre Company, The Edna Manley school for the Visual Arts, the St Patrick’s Foundation and through the Carreras Postgraduate Scholarship in the fields of medicine, public health, law, the arts, communication and business administration and most recently, forensic psychology.

Private sector contributions

Brown cautioned the government, stating that a state agency is hardly as effective as a private sector company in “making targeted investments in community development and providing continuous community services”. He also called for the government to provide incentives for companies such as Carreras whose “record of community engagement” was meeting the needs of the communities.

Government calls on companies to support community programmes

However, yesterday, Pearnel Charles, Minister of Labour and Social Security told Caribbean Business Report that Carreras’ position if carried out, would be unfortunate for the country. “It would be unfortunate for Carreras or any other company to withdraw their support from community programmes because of taxes the government is collecting for the good of the nation,” he said. Charles said, unlike Carreras, the government cannot withdraw its support from education, national security, medical care for the public or “turn off the street lights at 7 ”o’ clock”.

“Carreras has the option not to support community programmes, not to support football programmes, but the government does not have that option. We don’t have that option not to tax,” he said. “We could only appeal to Carreras and other institutions and corporate companies to not withdraw their support for social and community development because it can only put the country in a worst place.”

He said many countries all over the world are in a bad situation as a result of the recession and as such companies should be mindful of the role they play in the turnaround. “If we close down our programmes when young people are now absorbed and involved in what will happen, what will be the consequence?”, Charles said.

Illicit trade in cigarettes

The issue of illicit trade in cigarettes has also been a sore point for the company which is the sole authorised distributor of tobacco products in Jamaica. Brown said that the continued taxes on its operations and customers may be providing an opportunity for illicit traders to benefit more.

“I would like to take this opportunity to ask the government to look again, and examine whether some of the measures may not threaten the viability of legal business entities such as ourselves, and give a new lease on life to those committed to operating in the illicit trade — an operation which does not contribute to government revenue streams nor community development,” Brown said. Following the increase in the SCT, Carreras has had to increase the prices for the brands of cigarettes it distributes, including Craven A, which has since moved from $500 to $580 per 20 pack; Matterhorn, Dunhill, Rothmans and Captain Black Pipe Tobacco.

Charles said that this possibility is well within the considerations of government and that efforts are being made to protect Jamaica’s borders so that the illicit items do not get through. “We are plugging those holes. We are not stupid. We cannot expect Carreras to pay taxes and allow the others to come in. If Carreras can’t sell we can’t collect the taxes,” he said.