BUSINESS process outsourcing (BPO) companies operating within Special Economic Zones (SEZs) are now being afforded the benefit of employment tax credit (ETC), which provides business owners the ability to claim credit against income tax payable for the contributions to their employees’ statutory deductions.

This follows the Senate’s approval of the facilitating legislation — the Income Tax (Amendment) Act, 2022 — during a special sitting on Thursday.

The Income Tax (Amendment) Act, 2022, is a companion Bill to the recently passed Special Economic Zones (Amendment) Act, 2022. Both pieces of legislation work together to ensure conformity with international standards of tax transparency as well as improving efficiency in administration of the SEZ regime.

The SEZ is a modernised regime replacing the free zone model and it is designed to allow Jamaica to take advantage of changes in global production and market conditions and to facilitate our participation in global value and supply chains.

The recent amendments to the SEZA ensure that there are reduced opportunities for revenue leakage locally and shifting of profits internationally.

Leader of Government Business in the Senate, Kamina Johnson Smith, who piloted the Income Tax (Amendment) Act, explained that the employment tax credit is one of the primary incentives under the principal Act but the SEZA legislation had provisions which prohibited entities in economic zones from claiming the benefit.

“That was addressed and now the amendments in the Income tax Act will provide further clarity. By widening the scope of the ETC to include businesses under the SEZA. So they work in a cycle to ensure that they support each other and it will provide clarity to administrators also who function as part of the operation of the regime,” she said.

Johnson Smith further noted that clauses two and three allow for the insertion of the word ‘business’ in respect to the application of the employment tax credit and the treatment of dividends in Sections 32 (a) and 38, respectively.

“This ensures that the entities that offer business process outsourcing can operate in the zones and receive benefits contemplated by the SEZA and the Income Tax Act when they are taken together,” she said.

The Government senator said the insertion of the word ‘business’ is extremely important as it’s omission had excluded an entire sector which has been one of the most resilient.

“We would have been excluding a sector that has managed to grow beyond its COVID experience and therefore it is critical especially when that sector is responsible for such extensive employment in Jamaica,” she said.

Johnson Smith said the amendments proposed under the Income Tax Act ensure complementarity of the income tax regime as intended by Government policy.

“We are ensuring that we are improving the administration of the regime by addressing the ambiguities that had been noted,” she added.

She said the Government’s policy objective, as driven by the Ministry of Industry, Investment and Commerce, has always been to increase the productive capacity of the economy and the incentives provided within SEZs are designed to facilitate their contribution to nation-building.

“The incentives are found across multiple pieces of tax legislation including the Income Tax Act. But it came to the Government’s attention that there were instances in which the policy was not clear or clearly articulated. Accordingly…these amendments now ensure that the Income Tax Act is coherently implemented with that body of legislation.

Meanwhile, though seemingly annoyed that the Senate met on a Thursday to deliberate on a two-page Bill to insert a single word, and to change the name of the referenced repealed Bill from Jamaica Export Free Zone Act to SEZA, Opposition Senator Lambert Brown, said he was in support of the Bill.

“The Opposition…will support [the Bill]…but the process through Cabinet reviews legislation, needs to be tightened so we don’t have to waste parliamentary time,” he said.

He further called for the minister of finance and the public service to hasten the overall review of the Income Tax Act “because there are some glaring errors and omissions that policy needs to address”.