According to BITU president, Senator Kavan Gayle, this is necessary to protect the workers from changes in the economic landscape, which have continued to ravage this particular fringe benefit for workers in the sector, since its inception.

The House of Representatives approved changes under the Provisional Collection of Tax (Income Tax Confirmation) Resolution, affecting both the threshold and the taxable ceiling on the loans on January 20.

The amendments, which were piloted by Minister of Finance and Planning, Dr Peter Phillips, increased the ceiling on the untaxed portion of the loans from $1.5 million to $4.5 million, and reduced the tax on the interest on the loans to the average yield of Government’s six-month Treasury Bill rate, which is currently nine per cent, from the 14 per cent which was prescribed some 20 years ago.

The concessionary loan is among the fringe benefits included in labour agreements involving workers employed to institutions such as the Bank of Jamaica, merchant, commercial and development banks, insurance companies, building societies under the Building Societies Act and trust companies.

However, in 1991, then Minister of Finance and Planning, Dr Omar Davies, introduced a tax on these loans, as a revenue-earning measure to assist in financing the Government’s budget of that year. It was never removed.

The tax is calculated on the savings in interest enjoyed by employees, who benefit from loans granted at concessionary rates. The interest savings are considered to be the difference between the concessionary rates granted by the institution and the open market rate, which was at that time14 per cent. Since this represents a cost saving to the borrower, it was regarded as income under the Income Tax Law and, as such, attracted a tax of 25 per cent on the interest saved on loans exceeding the $1.5 million threshold.

The loans cover the workers’ need for housing, purchasing a motor vehicle for private use, purchasing land, emergency needs (Compassionate Loans), training and furnishing of residence for owner occupancy, etcetera.

According to Senator Gayle, while the trade unions and staff associations welcome the amendments made by Dr. Phillips, which has returned the loans to more realistic levels, there is a need for regular reviews, in order to ensure that they provide the benefits to the workers for which they were intended.

“Since the inception of the tax nearly 25 years ago, it has never been reviewed until now, and we want to ensure that the workers do not have to wait another 20 years for a review of the tax. So, I would suggest that it be included in the legislation that it is reviewed every three years,” said Gayle.

He added that the call for a three-year review period was one of several resolutions passed by workers in the financial sector at the BITU’s last delegates’ conference in 2013.