Stock market experts on Wednesday defended the tax breaks offered to small listed companies, arguing that it resulted in more than 300 new jobs and has raised billions in capital over three years.
These 13 companies listed on the JSE Junior Stock Exchange grew jobs at a time when the economy contracted, said participants in a Gleaner Editors' Forum that included representatives of the exchange, the Financial Services Commissions, listed companies and brokers of junior market IPOs.
"The Junior Market has raised J$2.1 billion in terms of capital for productive use to stimulate the economy since 2009," said Marlene Street-Forrest, general manager of the Jamaica Stock Exchange (JSE).
This capital fuelled expansion and earnings while also fostering employment, said JSE deputy general manager Robin Levy.
"The average pre-tax profit increased by 322 per cent since listing and the number of new jobs created is more than 300," Levy said. The majority of the 311 jobs cited were added by Dolphin Cove and Jamaican Teas.
Companies listed on the junior market receive a 10-year tax break - paying no income tax for five years and 50 per cent for the next five. The Government announced in this year's budget that it would consider eliminating the junior market waiver starting in 2017. If it holds to that decision, the waivers would disappear in 2027, but the JSE is already lobbying for its continuation.
The JSE argued Wednesday that the benefits of new employment and capital formation outweighs the lost earnings to Government in taxation.
The Financial Gleaner previously reported that in five years, Government will forgo an estimated J$3 billion in income tax from these listed companies but gain J$3.9 billion from taxes not waived, including general consumption tax and new payroll taxes.
The new jobs created include some 230 full-time workers and 100 temporary workers. The additional jobs created by listed companies is split:
These companies have made "great strides" since listing, said John Mahfood, chief executive officer of Jamaican Teas.
"The new employees far outweighs any concession that the Government has given because we have ... 30 years of (the economy) not growing, versus five years of not paying taxes," he said.
The junior market provides options for capital outside of the banks, said Brian George, president of listed gaming company Supreme Ventures Limited. Supreme Ventures is listed on the main exchange, but is about to invest in a junior market company that is about to go public.
"It's been very successful. All of the features of the junior market, along with the tax concession, have allowed smaller companies to take advantage of options for the benefit of shareholders," George said.
The junior market is also said to have increased the participation of women and individual Jamaicans as investors in stocks.
"We felt that we would have seen more institutional investors taking up positions in many of the small and medium-size companies. To our surprise, that was not the case. It was normal persons investing in the market. So it is a positive shift that we expect will continue," said Street-Forrest.
"We had 1.2 per cent of the population investing in the market (in 2002). Today, we have over five per cent, so there is growth. In 2002, we had under 50,000 as account holders in the Jamaica Central Securities Depository. Today, we have more than 110,000 persons as account holders, so there is growth".
The JSE launched its junior market on April 1, 2009, designed to encourage and promote investment in Jamaica. The junior market allows medium-size companies to raise a maximum J$500 million of equity capital.
Access Financial was the first junior company to list in late 2009. The market, with 13 listings, is valued at J$26 billion.