Newly re-elected president of the Jamaica Manufacturer's Association (JMA) Brian Pengelley on Thursday argued that general consumption tax (GCT) policies on deferment, electricity and even water crackers make production and exports uncompetitive.
He called the measures questionable and arguably contradictory.
For instance, a manufacturer of a GCT-exempt item has to pay GCT upfront at the ports on the raw material to manufacture the goods, increasing costs. However, Pengelley said that the finished imported goods enter the country without paying GCT.
"How can this be right?" he said about GCT deferment, a phrase that became a running chorus throughout his speech at the annual general meeting held at the JMA's head office.
If you are a producer of a GCT- exempt product you are not able to claim back the GCT on electricity. "It, therefore, becomes a direct cost. How can that be right?" he said.
The Ministry of Finance, as part of the 2012-13 Budget, introduced a one-percentage point reduction in GCT to 16.5 per cent, expected to cost the Government J$2.4 billion. Concurrently, it widened the GCT base to include previously exempt items expected to gain J$4.2 billion.
However, the implementation of Government's removal of crackers, except water crackers, from the GCT-exempt list has created inconsistent taxing by stores, said Pengelley.
"The definition of what is a water cracker continues to elude us and therefore this tax is being administered differently by retailers and producers. This decision also poses an administrative burden for companies producing a zero rated, GCT exempt and a taxable cracker, which all utilise the same input," the JMA president said.
"We are aware and have brought it to Finance Minister Peter Phillip's attention that some of these companies are in the possession of demand letters to pay retroactive GCT up to J$125 million for goods already produced and sold from 2007-2011, even though they were approved by the Ministry of Finance as a beneficiary under the GCT Deferment Scheme and have been operating within the guidelines and approvals they previously received. How can this be right?"
Pengelley said that the manufacturing sector in 2011 contributed 8.6 per cent to GDP, paid J$30.5 billion to government revenue, recorded growth of 1.4 per cent, employed 74,800 persons, and earned US$739.2 million in foreign exchange.
"This does not include the linkages to the other sectors, such as tourism, agriculture and the retail trade," he said.
The Government announced a raft of tax measures aimed to raise over $19 billion in new taxes to cover shortfalls in its J$612 billion Budget.