Sat | Apr 29, 2017

BPO sector warns Government against new 10% charges

Published:Sunday | March 8, 2015 | 3:00 AMMark Titus
Industry, Investment, and Commerce Minister, Anthony Hylton (3rd right), performs the symbolic ribbon cutting exercise to officially open the Elephant Group’s expanded Information and Communication Technology/Business Process Outsourcing offices in the Montego Bay Free Zone. Also participating in the exercise are, from left: chairman, Montego Bay Free Zone, and Factories Corporation of Jamaica, Clive Fagan; state minister for Industry, Investment, and Commerce Sharon Ffolkes Abrahams; director, Elephant Group, Yvan Garcia; and Montego Bay Free Zone executives - assistant vice-president for operations, Gloria Henry; and senior vice-president for business management and special projects, Beverley Williamson.
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Several stakeholders in the fast-growing Business Process Outsourcing (BPO) sector are warning that a proposed new tax could do irreparable harm to the still fragile industry.

The Government has proposed a 10 per cent corporate income tax (CIT) on entities in the BPO sector, but the players in the industry say this would place Jamaica in a more disadvantageous position, when compared to key regional and global competitors.

"I don't support what is being tabled," said Yoni Epstein, president of the Business Process Industry Association of Jamaica.

"This is untimely and if imposed and written into law it would make us uncompetitive. Countries that are seeing far more success than Jamaica have not done it, so it would put us at a disadvantage (because) Jamaica is a trading commodity, as is the Dominican Republic, Mexico, Honduras, Panama, Costa Rica, Brazil and the other countries in the region.

"If in business your commodity is more expensive than somewhere else, you would naturally go where the better price is," added Epstein who operates call centres in Jamaica and Bahamas.

 

HINDERING GROWTH

 

"If Jamaica is serious about growing this industry, the barriers to entry need to be removed in order to give it the wings and strength it needs to grow. We talk about 30,000 jobs (by 2020), but we won't get to 30,000 jobs if the CIT is imposed," warned Epstein.

Except for the Mexican government, all other competing countries offer CIT exemption.

In the region, Latin American states Panama and the Dominican Republic continue to attract interest with almost 100 per cent tax and duties exemptions being offered to investors.

The local BPO sector is now valued at US$260 million with Jamaica trying to attract investors by touting the country's proximity to North America, the attractive English- speaking pool talent and the modern telecommunications infrastructure.

But Davon Crump, CEO of Global Outsourcing Solutions Limited, is warning that the new tax could put paid to any plan to further grow the sector.

"Every other country's government is putting their money where their mouth is," said Crump, the immediate past president of the Montego Bay Chamber of Commerce and Industry.

"Take a look at the other countries. Comparatively, the records show that we are not as competitive as the other regions.

"There is already the issue of energy cost to contend with, so adding other stuff that could deter those who want to set up shop on our shores would not be a wise move by Government," argued Crump.

While uncertain how the CIT would impact the local BPO sector, Gloria Henry, assistant vice-president of the Port Authority of Jamaica, which is in charge of the Montego Bay Freezone Company Limited, is optimistic that the right decisions will be made in the interest of the sector.

The Montego Bay Freezone houses 17 of the 34 BPO operations in Jamaica, and while arguing that the 10 per cent CIT would be relatively small compared to taxes paid by other local entities, Henry noted that "some of our operators are not comfortable with the proposal".

"If we want to be competitive and bring business here as other countries are trying to do, then we have to offer the most competitive set of incentives, and so I hope this will play a role in the decision the ministry makes on this particular proposal," said Henry.

More than US$40 million in direct investment has been achieved over the last five years, resulting in the creation of almost 10,000 jobs locally, but Jamaica is still ranked 45th of 51 BPO destinations in the world, lagging behind global and regional competitors.