As Government moves to remove the 10-year tax break afforded to companies listing on the Junior Stock Market effective March 31, economist John Jackson reckons that rewarding companies on increased employment and expansion would prove more beneficial to both Government and the organisations.

Jackson, in presenting his recommendations at the Lions Club of Kingston’s monthly meeting on Wednesday, noted that if businesses achieved set targets for employment numbers and expansion, they would ultimately be rewarded with a tax incentive while increasing wealth in Jamaica.

“What we have on the Stock Exchange come Thursday will be 27 listed companies, and if it were not for the tax break very few of those companies would be listed,” Jackson told the audience.

“Now that they are listed and people see what can be achieved by listing, more companies may want to join. But there is nothing wrong in providing an incentive and I would not go the route that was done in the past. My incentive would be based on some known achievable targets; one would be employment, one would be expansion,” he added.

He stressed that there are signs that the matter of capitalism is not fully understood, as more shares owned by Jamaicans would indicate increased commitment to the country.

“We should be doing everything to broaden the ownership of shares rather than to narrow it down, and that seems not to be fully understood by many of us,” the economist said.

Since 2009, the Jamaica Stock Exchange Junior Market has provided a 10-year tax benefit structure — five years free of corporate income tax followed by five years of half tax — for listed companies, while acting as a major incentive for companies to go public. The benefit structure also included an exemption from tax on dividends or other distributions by Junior Markets and relief from transfer tax and stamp duty on transfers of shares in JSE Junior Market companies.

However, in 2013 the Government announced that it would remove the tax incentive, effective March 2016. Since then there have been numerous calls for Government to rethink its stance.

Jackson also blasted the Government’s introduction of the Minimum Business Tax (MBT) as a “dibi dibi” minimum tax on corporations that creates more problems for the sector. He reasoned that Government should instead look to more efficient measures of collecting taxes to include gasolene — with the exception of diesel – in order to fill the gap.

He added that 50 per cent of the taxes levied on Jamaicans come from General Consumption Tax (GCT) and other taxes. Another 20 per cent comes from Pay-As-You-Earn (PAYE).

“There are few other areas that you can collect taxes on that are as efficient as that. This country needs radical tax reform and it needs it urgently. One of the problems of doing business in Jamaica is the amount of taxes that have to be paid – and we have made it worse, vastly worse. We have burdened people unnecessarily and we have created a disincentive for people to be in the formal system and to formally organise their businesses,” he said.