Wed | Aug 15, 2018

Startups get ease under amended Minimum Business Tax

Published:Thursday | April 23, 2015 | 12:00 AMDaraine Luton
Finance Minister Dr Peter Phillips

Start-up businesses will not be required to pay the Minimum Business Tax until after two years of operations.

At the same time, businesses will not be required to pay the tax unless their gross sales exceed $5 million per year.

The House of Representatives yesterday gave approval for changes in the tax regime, following debate on a Bill brought to Parliament by Finance Minister Dr Peter Phillips, to validate and confirm as lawful actions taken under the Provisional Collections of Tax Act last year, and to make the Minimum Business Tax a permanent feature of Jamaica's tax landscape.

"It was introduced as a means of mitigating against revenue loss from impending reforms. The policy rationale was to ensure that all businesses contribute to government revenue, and thereby ensure a certain degree of equity in the application of tax collections," Phillips said.

The tax of $60,000 per annum is levied on all registered companies which have revenues greater than $5 million. Before yesterday's debate, the prescribed amount was $3 million but Opposition Spokesman on Finance Audley Shaw and his opposition colleague Karl Samuda argued that it was too low.

Shaw argued that in many small businesses, the so-called gross income is really gross receipts representing "monies that are paid to them but they are the intermediaries, paying on that money to someone else".

Shaw said: "The fair application of eligibility for this Minimum Business Tax should be net income, after business expenses because that net amount is what relates to the person's income."

Delroy Chuck, member of parliament (MP) for North East St Andrew, said the imposition of the tax was inimical to growth and urged the Government to reconsider it.

Likening the Minimum Business Tax to a poll tax, which refers to any fee, however indirect, that is required for one to vote, Chuck said if the country is to grow, businesses should not be burdened with so many types of taxes.

"This legislation is likely to take us in the wrong direction rather than in the right direction," Chuck said, arguing that it is "not only unnecessary but it is inimical to the development of a proper business culture."

broadening revenue base

He also said that the tax is "just a nuisance" for businesses that can afford to pay the tax, and that for small businesses, it could be the death knell.

However, Samuda, MP for North Central St Andrew, said the tax represents an important step towards broadening the tax base.

"We can't have our cake and eat it. We cannot, every time we stand here on both sides of this aisle, talk about the need to widen the tax base and the moment an attempt is made to widen the tax base and ensure that revenues are collected at a minimum, there is a big howl about it," Samuda said.

He said that the prescribed amount of $3 million was too low but the "principle is absolutely correct".

Having now been passed in the House, the Bill will go to the Senate for consideration.