Business tax reform most significant in 30 years
The Fiscal Incentives (Miscellaneous Provisions) Act has been described as the most significant reform of the business tax system in 30 years and should contribute to a more attractive investment climate.
More specifically, it will reduce red tape and have positive impact on competitiveness, according to Joseph M. Matalon, chairman of the Private Sector Working Group on tax reform.
Jamaica's current four-year programme with the International Monetary Fund (IMF) contemplates specific structural benchmarks for tax reform, beginning with reform of the incentives regime effective January 1, 2014.
Addressing a forum hosted by the Ministry of Finance and Planning on the new tax legislation in Kingston last week, Matalon said that among the implications of the reform was that the Jamaican business community will be offered an opportunity to operate in an internationally competitive corporate income tax regime.
Matalon said the proposed corporate income tax regime should reduce the tax-induced cost of capital, which in turn should contribute to a more attractive investment environment.
He said the proposed regime was most attractive for unregulated entities which could avail of an employment tax credit by reference to payroll statutory deductions remitted in the year of assessment.
This offers entities an opportunity to reduce their effective corporate income tax rate to as low as 17.5 per cent, he said.
An entity is automatically entitled to avail of the provisions of the corporate income tax regime once it is engaged in the conduct of an active trade in Jamaica, Matalon said.
"There is no application or approval process, which should contribute to a reduction in the red tape of establishing and operating a business in Jamaica," he added.
Matalon said it was also proposed that nearly all non-consumer goods will be liable to customs duty at a rate of zero per cent. This means that many businesses - whether incorporated or not - will be able to import critical capital goods and key operating inputs free of customs duty.
"The absence of customs duty on such inputs will reduce the cost of doing business, and will have a positive impact on competitiveness," he said.
NO APPLICATION REQUIRED
The importation of such non-consumer goods on a duty-free basis shall be automatic at the time of importation, whether by a distributor, the retailer or the end-user. No application, certification or other approval will be required.
"This reduction in red tape represents an incentive in its own right, as businesses can focus more on their core activities and less on having to navigate through burdensome tax compliance requirements," he said.
It is also proposed to introduce a streamlined productive inputs relief regime to offer whole or partial relief from customs duty across sectors for certain consumer goods that are used as key productive inputs in the operation of one's business.
"While this will require a process of application, certification and oversight, this will replace the myriad of similar mechanisms that currently exist, each with their own specific administrative requirements," Matalon said.