Transfer pricing regime could 'spook' investors - PSOJ boss
The Private Sector Organisation of Jamaica (PSOJ) is maintaining that the transfer pricing regime, which has been approved by the House of Representatives, is "scary for investment".
PSOJ President William Mahfood said yesterday that there are aspects of the framework that could "spook" big international investors that were planning to come to Jamaica.
"There are a number of things in the legislation that make it almost scary for investors to do business in Jamaica," Mahfood told The Gleaner.
The transfer-pricing regime, which is an anti-tax-evasion mechanism, seeks to ensure that intra-company transactions are in keeping with the arm's length principle.
Advanced transfer pricing rules have been passed in the House to allow entities to indicate the intra-company transactions, which may occur and the cost of those transactions. Those transactions are open to investigation by the tax authorities.
"What we have said is that we want to have more dialogue," said Mahfood, while arguing that some aspects of the proposed law are "really completely ridiculous".
"At at time when we need investment and we need jobs and we need growth, what really worries me is the fact that this may spook a lot of investors as to the ease of doing business in Jamaica and the friendliness of the business environment," the PSOJ president said.
However, Ainsley Powell, commissioner general of Tax Administration Jamaica (TAJ), said yesterday that the new transfer-pricing regime will bring more equity and clarity to the process of determining whether intra-company transactions observe the arm's length principle.
The House of Representatives on Tuesday voted along party lines, with the Government side prevailing, for the enactment of rules to give effect to a transfer-pricing bill, which was recently passed.
"It will create a better basis on which we can deal with transfer-pricing issues and the whole question of arm's length transaction," Powell told The Gleaner yesterday.
"We now have a set of rules by which we can work and, going forward, we will have less issues come audit time. So, if there is an audit and you have an agreement and we know the methods by which things are to be done, then we should have less issues when it comes to the matter of transfer pricing," the TAJ head told The Gleaner.
He noted that in the past, the commissioner of TAJ had to establish that the transaction was at arm's length.
That is now to be changed with the new law, as the taxpayer has been asked to come upfront and establish that a transaction is at arm's length.
"What we are saying is that you would have had the obligation anyway in the past to determine the price at which the transactions are carried out. We are just asking for the documentation now," Powell said.
Taxpayers will have to begin reporting on the 2015 year of assessment, a requirement which has led the parliamentary opposition and members of the business community to declare that the new law has retroactivity.
However, Finance Minister Dr Peter Phillips has disagreed.
"All the reports for 2015 are due not later than March 2016. This is no less. What is the difference here is that we are giving the assurance that in this transitional period, no prosecutions will be undertaken, and that is to emphasise the collaborative approach that is to be taken," Phillips said.
"We have specifically amended the legislation to ensure that there be no prosecutions under this until 2017," Phillips added while acknowledging that there would be "teething pains".
Powell stressed that the penalties built into the law would only become effective in relation to the 2016 year of assessment, but the requirement to submit certain information will be for the 2015 year of assessment.