GCT and exporting services caught up in Wonderland
Consider this: I leave Jamaica on a flight to New York. In-flight, I purchase non-consumable goods onboard the aircraft.
Question: Were the goods purchased in Jamaica, the place of departure (embarkation) or in the United States, the place of landing (disembarkation)?
This seems to be the issue at stake with the application of GCT to the exporting of services.
Goods and services that are exported from Jamaica are taxed at zero-rate. Normally, a business may qualify as exporting goods provided its products are exclusively for sale outside of Jamaica. However, 'goods' are different from 'services' and under the recent GCT amendments, before a service is treated as exported it must be obtained and used or enjoyed where it is 'physically' performed. This performance must take place outside Jamaica, and should be to a 'non-resident' in relation to immovable property situate outside Jamaica.
What in Heaven's name is this saying - is there any meaning in it? As the king said in Alice in Wonderland: "If there's no meaning in it, that saves a world of trouble, you know, as we needn't try to find any ... ."
We need to know what it means precisely to export a service from Jamaica. Usually a service is exported from Jamaica if the tasks are provided in Jamaica but the benefit of the service is utilised outside of Jamaica. What is the law now saying? It cannot be that a service can only be exported if the service provider leaves Jamaica and goes abroad to perform it.
Whomsoever advised the finance minister to charge a foreign customer GCT when the services are not used at Jamaican establishments is doing a disservice by making Jamaican service providers less attractive to international customers.
SCOPE OF OUR GCT
The consideration should turn on whether the overseas customer has a business or establishment in Jamaica, and whether that customer receives the service at its overseas establishment or at a Jamaican establishment. The service must then be used exclusively at that overseas establishment.
For instance, if a production for an advertisement is done here exclusively for airing in Trinidad, the question should be whether the services were performed for a non-resident to be utilised outside Jamaica. If the answer is yes, then why is the constellation on the service provider's physical presence when carrying out the service? Given the technology currently available today, why is physical presence necessary?
Consider this: A person in Jamaica when placing a call to Canada will end up paying one of the local carriers to complete this call. FLOW or Digicel will take the call only to the Canadian gateway. At that point a carrier in Canada will then take the call and deliver it to the intended recipient, thus terminating and completing the call in Canada. However, although it was clearly exported, the question of GCT with respect to messages transmitted cross-border was never considered. Under the new dispensation it perhaps will now need to be considered.
When tourists visit, their purpose is to tour, mainly for pleasure and enjoyment. Generally, they will consume food and drinks, and this alone is a supply of goods. However, where food and drink is supplied to enable customers to consume it in comfort, what you have is a restaurant service which is the essential part of the enjoyment activity. It is clear that as they will be consuming the pleasure here, it is not exported to them and is, therefore, not zero-rated for GCT.
On the other hand, consider a cruise ship stopping at a Jamaican port. When supplying food and drinks onboard it is a service supplied in Jamaican waters, but technically this is outside the scope of our GCT.
Looking at the final prescribed circumstances that the service must be in relation to immovable property situate outside Jamaica, the definition 'immovable property' is determined by the law where it is located and is permanent, having a fixed address. It may include land, buildings, or improvements. Is it then that the service can only be exported if it relates to land outside Jamaica? I cannot really tell, only speculate. Yet, this is apparently the effect of the legal provision.
What is the legislator trying to achieve and what is its meaning? As Alice said: "I don't believe there's an atom of meaning in it."
n Everald Dewar is senior taxation manager at BDO Chartered Accountants in Kingston. firstname.lastname@example.org