Tue | Nov 19, 2019

Upbeat bankers want to pay less tax

Published:Wednesday | October 17, 2018 | 12:00 AMHuntley Medley/ Senior Business Writer
President of the Jamaica Bankers Association and President and CEO of Scotia Group Jamaica, David Noel.

High on the agenda of the umbrella Jamaica Bankers Association, JBA, now led by president David Noel, is pressing the Government for banks to pay less tax.

So is growing the number of 'banked' Jamaicans from the current estimate of 30 per cent.

All this while the JBA head is singing praises of the economy; seeing green shoots in debt management, job growth and reduced unemployment numbers.

"Financial institutions pay a 33.3 per cent tax rate versus a lower tax rate for other industries at 25 per cent," said Noel, who was elected JBA head in April. That appointment came half a year into his promotion to president & CEO of Scotia Group Jamaica, the second-largest commercial banking group.

"In addition to that, there is an asset tax that was supposed to be a temporary measure, that has turned out not to be temporary measure. We would like it to go away sooner than later," he said, while positing that tax relief for banks would be positive for the national economy.

"We believe that helps us to lend to the economy, help grow the economy. It's a win-win situation," the JBA president said.

The banks are also said to be collaborating to build out and secure digital banking channels to reduce long in-bank lines to ease customer pain and shave staff costs. Noel said staff removed from processing transactions in banks are being redeployed to boost problem-solving for customers.

"As an industry, we collaborate on issues related to fraud. We all have an interest in JETS; the network that connects are our networks and points-of-sale machines so that we are evolving that platform to be more robust and to deal with the new types of fraud that we are seeing," he said of the security cooperation.

Eliminating bank lines and migrating customers to online banking channels is not only shaving costs for banks, but serves to dampen the uproar from account holders over bank transactions charges, with big banks National Commercial Bank and Scotiabank as market leaders, collecting the lion's share of the multibillion-dollar inflows.

"We are helping our customers understand how to use alternative banking channels and their advantages - how to bank in ways that are more convenient, but also more cost-effective for them," Noel said.

Growth in its customer base is an area Scotiabank is looking towards to ramp up profits, but Noel said the broader issue of financial inclusion is not only being tackled with an eye on the bottom line.

"I see financial inclusion as more than just a way of finding a more efficient way to bank to reduce costs and increase our numbers; it's really about growing our economy," the JBA president insisted.

He maintains that banks, financial authorities and law-enforcement officials must work to find greater balance in policing financial crimes, while not causing people to spurn formal banking. "We need to make banking simpler, opening an account simpler," he emphasised.

"We need to work with the Government to ensure that while KYC is important and antimon laundering is very important, we do it in a way that is practical so that every Jamaican who wants [to] can open an account."

Know Your Customer, or KYC, guidelines have the objective of preventing banks from being used, intentionally or unintentionally, by criminal elements for money-laundering activities. Related procedures also enable banks to better understand their customers and their financial dealings.

The JBA president said the association continues to work with regulators to ensure the protection of the industry by making the right investments in compliance, preventing money laundering, but at the same time encouraging financial inclusion and broad economic growth.

The bankers' association head believes encouraging more people into formal banking increases transparency and overall economic development.

"You increase our access to data to be able to make credit decisions, and you allow us to start lending to those individuals and small businesses and micro businesses that I believe are the true engines of economic growth," the banker said.

To this end, the JBA, will be embarking of increased public awareness activities.

Meanwhile the JBA head echoed the Government's view of the economic situation that underscores a generally high level of business confidence at the moment. "I think the Jamaican economy is the strongest it has been for a long time," Noel declared.

He is also supportive of the Government's official explanation of the foreign exchange situation, noting that there was no real reason for undue concern over the medium to long term.

"Last year, the central bank embarked on a new system, a more transparent, market-driven system of setting the exchange rate, which I and the JBA fully support," he stated.

"With a more transparent system that is new, you have more volatility, more movement. I believe that if you look at our fundamentals - reserves are over $3 billion, we now have a primary surplus of seven per cent, we have seen unemployment come down. Looked at from a macroeconomic perspective, I am not overly concerned about our foreign exchange rate or the country's ability to continue to grow and develop."

Noel added that while there may have been temporary spikes in the exchange rate - he did not elaborate on what he saw as the causes - the real focus should be on the overall strength of the Jamaican economy.