Senate approves laws to remove taxes in share buy-back transactions
The Senate yesterday passed companion pieces of legislation allowing for companies listed on the Jamaica Stock Exchange to be exempt from paying income tax, stamp duty, and transfer tax on share buy-back transactions.
Piloting the three pieces of legislation, Leader of Government Business in the Senate Kamina Johnson Smith said that at present, an ordinary shareholder engaging in a share buy-back transaction is at a disadvantage, compared with a shareholder selling shares to a third party.
She argued that a shareholder selling shares to a third party pays no stamp duty, transfer tax, or income tax, while the shareholder who engages in a share buy-back option would be taxed.
Level the playing field
Johnson Smith told her parliamentary colleagues that the reform was intended to level the playing field and increase liquidity in the stock market.
"The amendments today (yesterday) as they will largely be applicable to listed companies will take place in the context of the Companies Act, the Stock Exchange rules, and the regulations and guidelines of the Financial Services Commission."
In his contribution to the debate, Senator Don Wehby said that there would be zero loss of revenue to the Government arising from this legislative amendment.
"No public listed company is going to do a share buy-back without a tax waiver or this exemption being included in there."
Wehby said that the move by the Government would stimulate growth in the equity market, locally.
While indicating that the Opposition would support the bill, Senator Lambert Brown questioned, "Who is going to pay for what is given up?"
"Sadly, Mr President, it is the poor and the middle class in our country who have had to be paying for these so-called give-backs".
At this point, Wehby challenged the accuracy of Brown's comments, saying that "there is no company that would do a buy-back because of the tax implication unless the minister grants a waiver, and this is what we are trying to normalise, so it's not giving up because zero times zero is zero."
However, Brown maintained his position, reiterating that the poor and the middle class are always called upon to fill the gap when waivers or exemptions are granted.