Tue | Sep 26, 2017

Government firm on BPO tax - Stakeholders warn that this could drive away investors

Published:Sunday | March 12, 2017 | 3:00 AMMark Titus
Prime Minister Andrew Holness (right) watches while Finance Minister Audley Shaw (centre) and Fayval Williams share words.

 

Western Bureau:

Minister of State in the Ministry of Finance and the Public Service Fayval Williams has slammed the door in the faces of operators in the business processing outsourcing (BPO) industry who have been pushing for a rollback of the 12.5 per cent corporate income tax (CIT) levied on the sector.

Despite claims by major players in the sector that the tax could derail the expansion being projected by the Andrew Holness administration, Williams told a BPO breakfast forum in western Jamaica last Friday that it will remain in place, at least for the life of the current International Monetary Fund (IMF) deal.

"I can't stand here and promise that (the CIT rollback) is something that we are going to do," said Williams.

"We cannot run afoul of the IMF programme ... 12.5 per cent corporate income tax rate will remain as long as the IMF programme exists," added Williams at a time when several stakeholders in the BPO sector and their partners, including Garry Sinclair, president of FLOW Caribbean, have been calling for more to be done to encourage local and foreign direct investments in the sector.

Sinclair, who addressed the breakfast forum before Williams, had argued that every effort should be made to create the right environment for the sector to grow.

"We have to continue to create the environment for growth and prosperity, and specifically the new proposed structure by the special economic zone authority is going to be an impediment to growth," said Sinclair.

"We are threatening to kill the goose that lays the golden egg ... while it is in the crib. We have to give the industry a chance to breathe, grow and mature," added Sinclair.

 

Disappointment

 

In the meantime, Davon Crump, chief executive officer of the Montego Bay-based Global Outsourcing Solution Limited, was quick to voice his disappointment with the government's refusal to roll back the tax.

"I am very disappointed because a CIT will only create uncertainty and make Jamaica unattractive," said Crump.

He charged that the decision could cause prospective investors to look to other emerging destinations such as Cuba.

"And I will repeat that while other countries are rolling out the red carpet, we seem to be making things more difficult for our people.

"This will also put me as a local investor more at a disadvantage. Take a look at the other countries, the record speaks for itself. We are not as competitive as the other regions. Every investor's first concern is whether or not the prospected venture will be viable," added Crump.

Apart from Mexico, competing countries in the Americas offer tax exemption to BPO entities, with Panama and the Dominican Republic offering almost 100 per cent tax and duties exemptions being offered to investors.

Holness has repeatedly argued that the BPO sector is critical in the plan in his administration's push for inclusive economic growth and job creation.

According to Holness, for the last five years the industry has experienced tremendous growth, with 45 companies operating in the ICT/BPO sector.

The prime minister recently indicated that employment in the sector has moved from about 12,000 persons in 2011 to 22,000 at present, and the Government is projecting the figure to reach 30,000 within the next five years.

mark.titus@gleanerjm.com