Gov't seeks to pass law to tax profits of multinationals
Arguing that Jamaica needs to rid itself of the propensity to "study and study and talk and talk" without taking action, Finance Minister Dr Peter Phillips said on Tuesday that the long-promised amendments to the Income Tax Act, in respect of transfer pricing, is necessary if the country is to climb the developmental ladder.
"You know why some of the developed countries, which we all admire, people line up to get visa to go to these places? One of the things about these places is that when you don't pay the taxes, they deal with you swiftly and comprehensively. That is why their schools have all the facilities that schoolchildren need ... . That's why their places are developed more than other places ... . They take the difficult decisions that have to be taken in order for a country to move forward," Phillips said.
Transfer-pricing legislation is an anti-avoidance law aimed at ensuring that related parties operate at arm's length while doing business. The amendments seek to put the onus on the taxpayer to demonstrate that the arm's length principle is being applied.
Principally, the bill seeks to allow Tax Administration Jamaica (TAJ) to collect tax on profits earned by multinationals that operate in Jamaica.
"The purpose is not to penalise, but to facilitate. The purpose is not to be draconian, but to enable a fair return to the people of Jamaica by having everyone pay what is due to the Consolidated Fund of Jamaica," Phillips said.
It gives the commissioner general of TAJ the authority to determine whether parties are connected and what the arm's length price should be on transactions between connected parties.
"One of the deficiencies collectively that we have endured is this tendency to study and study and study and talk and talk and talk and not act to put things in place," Phillips said as he closed the debate on the bill to amend the Income Tax Act in the House of Representatives.
Opposition Spokesman on Finance Audley Shaw has warned of Jamaica becoming less attractive as a destination to do business if the bill is passed in its current form. While calling for various amendments, Shaw pleaded with the Government to delay enacting the new law until both the regulations and advanced-pricing rules are put in place.
He suggested that the bill, along with the regulations, be sent to a parliamentary committee for consideration.
NO FURTHER DELAY
Phillips said that the bill will not come into force until the regulations have been passed by the Parliament. He added, however, that the Government would not be delaying the passage of the bill, noting that a policy decision was taken in 2011 to put in place the framework for transfer pricing.
"Like so many decisions, they (the former administration) have taken them and we have had to act to put it in place," Phillips said. "We can't delay it any further."
Jamaica, under its extended fund facility programme with the International Monetary Fund, has told the multilateral organisation that the transfer-pricing bill was expected to be passed in October 2015. It said that the TAJ was developing its capacity to effectively administer the new law upon its adoption.
Phillips said the new law would come into force after the regulations are provided and would apply to the 2015 year of assessment. He said that in 2016, all that is intended is that the taxpayers will have the opportunity to provide documentation to support their assessments.
"It is not intended that if there are disagreements, these will be dealt with in any draconian way," said Phillips, while admitting that the transfer-pricing regime represented complex legislation.
Debate on the bill has been suspended to give the Parliament the opportunity to examine a set of amendments that have been proposed by both the Government and the Opposition.