Phillips: Tax incentives not for non-compliant firms
Minister of Finance and Planning Dr Peter Phillips says that businesses which fail to turn over statutory deductions on time will not benefit from the proposed Employment Tax Credit under the fiscal incentives omnibus tax regime effective January 1.
“It is designed to target compliant employers. It denies incentives to employers who are noncompliant,” Dr Phillips said last Tuesday as he piloted four of the fiscal incentive measures through the House of Representatives.
“We know, unfortunately, that there are too many businesses that collect deductions, such as NIS, Housing Trust or PAYE taxes that are due, and who often don’t send it forward to the relevant authorities as quickly as they should. If they don’t do it, they won’t have the benefit of these employment tax credits,” he said.
The two bills included in the fiscal incentives package are the Fiscal Incentives (Miscellaneous Provisions) Act, and the Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act 2013.
The Fiscal Incentives (Miscellaneous Provisions) Act sets out the reforms to be carried out to corporate taxation, including the introduction of an Employment Tax Credit, changes to the capital allowance regime, and revision of provisions governing the utilisation of tax losses. It also deals with “grandfathering” and transitional arrangements relating to changes from the old to the new incentives regime.
The Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act, sets out provision for the designation of large-scale projects and pioneer industries that would qualify for tax credit under the Income Tax Act.
Also included in the framework are the (Customs Tariff (Revision) (Amendment) Resolution 2013 and Stamp Duty (Amendments of Schedule) Order 2013, which were also approved.
Phillips said that the new income tax regime will not discriminate in favour of one unregulated business activity over another, reducing the potential for misallocation of resources that would otherwise exist where the tax regime attempts to pick winners by offering preferential income tax treatment to certain favoured sectors.
“It will be available to all businesses conducting trade, whether large or small, or whether carried on through a company or directly by a self-employed individual,” he explained.
“Entitlement is automatic. Once the taxpayer is engaged in the conduct of trade in Jamaica, they don’t need any waiver from the minister of finance present or in the future. It will be something that will be in place. Once you are doing business, you are entitled to it. You don’t have to be anybody’s friend or connected to anyone to get the benefits of these incentives,” he said.
He stated that the regulations, which will explain what constitutes Large-Scale projects and Pioneer Industries, will be tabled in the House of Representatives prior to Parliament’s Christmas break to ensure that they are in place for the January 1 start-up.
He said that the estimate of the inflationary impact of the process is less than one per cent, and that the list of some 600 products covered under the Customs and Stamp Duty Acts was not “cast in stone”, and therefore can be revised in the future.
Opposition Leader Andrew Holness welcomed the legislation introducing the new regime. He noted that the process was started under the previous Jamaica Labour Party Administration to replace tax arrangements which have outlived their usefulness.
He said that while the bills were not perfect and there were many concerns about their effectiveness, “there is general acceptance that there has to be reform of the tax system”.