Gary Peart, CEO of Mayberry Investments Ltd, indicated yesterday that the company has “several” firms waiting for listing on the Junior Market of the Jamaica Stock Exchange (JSE). However, the prospectus for each of these companies cannot be released until new legislation revising market incentives are passed in Parliament.

The Junior Market Incentive ended for new Junior Market listings (companies) on March 31, 2016. The new government has promised to reinstate it.

“We are waiting on the legislation to be passed,” Peart told the Jamaica Observer.

That comment was also echoed by Marlene Street-Forrest, general manager of the Jamaica Stock Exchange, who further said the JSE had not yet been advised of the timing for passing of the revised laws.

“I have no idea as to the time frame,” she told the Business Observer, adding that she has been in constant dialogue with Minister Fayval Williams since March.

Williams is Minister of State in the Ministry of Finance and the Public Service with special responsibilities for finance.

Street-Forrest noted, “The Junior Market Incentive ended for new Junior Market Listings (companies) on March 31, 2016, and based on the current government’s commitment, they intend to reinstate the benefits as initially given – that is, 10 years’ incentive where no corporate tax is paid for the first 5 years, and 50 per cent of the prevailing rate is paid in the next five years.”

Requests sent by the Business Observer to Minister Williams for an update were met with the promise of an update by mid-week.

The International Monetary Fund (IMF), with which the government has been discussing a successor regime to the current Extended Fund Facility (EFF), does not appear to be in favour of reinstating the incentives in their old form.

In its combined eleventh and twelfth review under the EFF, the Fund said in June that the old regime was subject to abuse.

It was noted, “Developing financial markets to provide alternate financing sources is important for building private sector entrepreneurship. For example, expansion of the junior stock exchange should be encouraged. However, this should be achieved by lowering barriers to entry and simplifying listing requirements – with appropriate risk control – rather than using tax incentives to encourage listing, which is subject to abuse.”

It added, “On the junior stock exchange tax incentive, the authorities noted that the tax incentive played an instrumental role in SMEs’ decision to go public, and intend to continue implementing the incentive while tightening rules to prevent its abuse.”

The IMF did not outline in what way the incentives were open to manipulation or abuse.

Those in favour of reviving the incentive say companies benefit by using this period of freedom from tax to reinvest the tax benefit into revenue-generating and cost-saving activities, and this results in more profits.

These profits can then be redeployed in the business in order to cover the early working capital needs of the company and enhance its growth. It is then expected that after five years, these companies will increase their annual profits and will start paying taxes on higher profit levels – which should more than make up for the tax breaks received earlier.

For companies which listed in March 2016, they will have the incentive through to February 28, 2021. For others, the door was closed in April.

Street-Forrest outlined that, based on her understanding, steps to have the incentive re-instituted will require the draft of a bill which will then be sent to the cabinet office for consideration by its legislation committee.

Cabinet will need to approve the bill for debate in the House of Parliament. If successfully passed by both the upper and lower houses, the bill will be sent to the Attorney General, then to the Governor General for assent before finally being gazetted.

“The longer it takes, the greater the negative impact on new Junior Market Companies listing, and frankly, I am troubled as this impedes growth,” Street-Forrest commented.