Staggering rum tax

Daraine Luton, Senior Staff Reporter

HOTELIERS are to go into a huddle shortly, to consider the possible impact that an increase in the Special Consumption Tax on alcohol is likely to have on the sector.

Evelyn Smith, president of the Jamaica Hotel and Tourist association, told The Gleaner yesterday that alcohol is a significant cost to the cost structure within tourism entities, particularly within the all-inclusive sector and thus any increase could impact competitiveness.

It is something that we will have to carefully consider what it means and quantify what it means in terms of an actual increase in cost, Smith told The Gleaner.

Finance Minister Dr Peter Phillips yesterday announced modifications of the alcohol regime to unify the Special Consumption Tax which now applies to alcoholic beverages. The measure will see a duty of $1,120 per litre of pure alcohol being paid on such beverages starting on Tuesday.

At present, over proof White Rum attracts a SCT of $960 per litre of pure alcohol, while alcoholic beverages in the tourism sector attract $700 litre of pure alcohol rate.

Phillips said the modification was being done further to the Governments commitment to provide for a standard rate of taxation and to reduce any existing anomalies.

Smith noted that Jamaica, as a tourism destination, was competing with countries right across the world. Comparative to our destination, we have to be very mindful that we compete internationally and that means we have to look at how we price ourselves versus competing destinations, she said.

Wray and Nephew's marketing director Gary Dixon, told The Gleaner yesterday that the company was not in a position to comment on the effect of the new rate, as the company was yet to see changed rates that have been proposed by the Government.

Meanwhile, other new taxes announced by Phillips include an increase in the age limit in the sale of second-hand vehicles while maintaining the rate. This measure will yield $26 million.

There is also a modification of the duty regime for specified vehicles which is set to yield $1.2 billion. The new regime includes a 10 percentage points reduction on customs duty on vehicles 2000cc and above, moving from 30 per cent to 20 per cent. At the same time, the rate structure for vehicles with 3500cc and hybrid vehicles will be changed.

The minister also announced an increase in premium tax for recognised and non-recognised life insurance companies, which by statue, are required to pay three per cent and four per cent respectively of gross premiums earned per year.

But in a move to get 276 million to help finance the Budget, the Government is to increase the rate payable under the Income Tax Act to 5.5 per cent.

At the same time, the investment tax for insurance companies is to be increased by 20 percentage points in a move by the Government to unify the tax rates as part of the country's reform efforts. Some 700 million is to be realized from the measure.

The tax will be applicable for the remaining eight months of the year of assessment in 2014 in relation to the statutory income for the year. Phillips, however, said the first four months will be charged at the old rate of tax.

There will also be an increase in the asset tax, which is to yield $1.78 billion. Entities regulated by the Bank of Jamaica and the Financial Services Commission will see their tax on the value of their assets moving from 0.14 per cent to 0.25 per cent.

For other entities with asset value of at least $50 million, $200,000 will be charged; those with a value of at least $5 million but less $50 million will pay $150,000; and those with a value of at least $500,000 but less than $5 million will pay $100,000.