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Resist efforts to discontinue junior market, says Chin

Published:Wednesday | October 2, 2013 | 12:00 AM
Lascelles Chin

Marcella Scarlett, Business Reporter

Chairman of the Lasco Group of Companies Lascelles Chin is encouraging the Government to resist all pressure being exerted for the discontinuation of the junior market of the Jamaica Stock Exchange (JSE).

He said while the Government was losing out on tax revenues in the short run, it stood to benefit more in the long run.

"Nothing good will happen to Jamaica if they get rid of the junior market, because the junior market is what is creating all the excitement in the stock market," Chin told Wednesday Business on the margins of Lasco's annual general meeting at the Terra Nova Hotel, St Andrew, on Monday.

"If it was not for the junior market, Lasco could not have grown the way it is growing. With all the expansion and employment going on, this would not have happened without the junior market," he emphasised.

Chin explained that as a result of listing, Lasco and other companies have been able to expand their operations, employed more people, and the Government benefitted from increased income tax and General Consumption Tax from increased production.

"Yes, they are giving up tax revenue on one hand, but on the other hand, they are getting back more than they are giving up," he said.

Lacso Financial, Lasco Manufacturing, and Lasco Distributors were listed on the junior market in October 2010 after raising J$415 million combined via an initial public offering.

The company, which is currently in expansion mode, is investing in a multibillion dollar complex in White Marl, St Catherine.

Chin said tax breaks offered to companies that list on the junior market were a necessary incentive to grow business.

"We are already three years through the 100 per cent tax break, and before you know it, the other two years (will) pass," Chin said of the initial five years after listing when those companies pay no corporate income tax.

"The other five years, where we are to pay 50 per cent of the tax, before you know it, those years pass too, and in the long run they (Government) will be getting a bigger base to tax so they will be getting back what they gave up more than 10 times over," he added.

Chin estimated that about 70 per cent of the 18 companies listed on the junior market were "doing well". But he added that it could be worse if some companies were not listed. "Maybe they would be out of business," he said.

"Not all of them are going to do well. Just like anything else, some will do well and others will not. Some will always do better than others," he added.

The Lasco chairman said the Government has to look after the businesspeople for Jamaica to progress because "if the businesspeople don't survive, then there will be more unemployment."

The JSE established a junior market in April 2009 to encourage domestic investment in entrepreneurship, employment, and economic development. It is designed to attract new capital and encourage new start-ups as it allows investors to put capital into legitimate small and medium-sized companies that are listed.

To participate, a company is required to raise between J$50 million and J$500 million of capital via an IPO with a minimum of 25 shareholders holding not less than 20 per cent of the issued share capital.

Tax incentives

In return, the companies are offered a tax incentive for an allowable period, not exceeding 10 years: income tax holiday for five years, and half income tax holiday for another five years. Thereafter, they are required to spend at least five years on the main market.

However, if a company delists within the 15-year period on the combined junior market and main market, it will be required to repay to the Government the tax benefits enjoyed during this period.

The junior market was born out of a need to assist small and medium-sized enterprises to raise capital which they were unable to obtain through commercial loans because they lacked the necessary security, and there was no capital market facility in Jamaica for them to raise equity capital.

It was established as a result of the collaborative efforts of the Government, the board of the JSE, the Financial Services Commission, and a steering committee comprised of key stakeholders.