MinFin may vary urban incentives
Avia Collinder, Business Reporter
Revisions to the law that offers tax relief to companies for investments that act as a check on urban decay have left the incentives intact, at a time when the Simpson Miller administration has placed a check on such subsidies.
However, the amended Urban Renewal (Tax Relief) Act, which has now been passed in both houses of Parliament, gives the minister of finance the power to vary the available benefits provided under the law.
In an accompanying memorandum that was filed when the bill was introduced in Parliament, Finance Minister Dr Peter Phillips noted that the law's objective at initial passage in 1995 was to provide relief from income tax, stamp duty and transfer tax to organisations or persons doing developments that restored areas suffering from blight or urban decay.
The law provided "incentives by way of tax relief to persons who purchase bonds issued for the funding of such development," his memo stated.
The 2015 adjustment, he said, would also "confer on the minister the power to amend or vary orders made under Section 3 or 4 of the act for special development areas and for declaration of approved developers, respectively".
The law would also provide for the variations to be applied retroactively, the memorandum said, but it did not specify what those ministerial variations might be.
RELUCTANT TO WEIGH IN
The Urban Development Corporation (UDC), the agency that manages the urban renewal incentive scheme, under the banner of the Tax Incentive Programme (TIP), on behalf of the finance ministry, was reluctant to weigh in on the implications.
UDC General Manager Desmond Malcolm said the effect of the change would best be determined with the passage of time, while Communications Manager Lorna Clarke said that as the executing agency for the programme, the UDC was focused on management, not policy.
"The ramifications of the change made by the minister is another story. We can only speak to the management of the programme ... . Over time, the rest of it will come out in the wash," Clarke said.
Malcolm otherwise indicated that lawmakers had done the right thing by extending the programme, saying 14 companies from Kingston and Montego Bay had benefited so far and that an undisclosed number of projects were in the pipeline awaiting approval.
Data provided by the UDC last Tuesday indicated that major urban renewal projects were being pursued in conjunction with the Ministry of Tourism, including projects for Spanish Town in St Catherine.
The urban renewal law was last amended in 2010 to add new incentives to encourage development in decayed urban areas.
In 2013, under the omnibus project for tax reform, the finance ministry said that TIP - which offers tax credits on capital investments in designated urban areas - would survive the reforms but its beneficiaries would be denied access to offerings under reformed tax laws.
Those reforms introduced an employment tax credit, for example, that would be denied to TIP beneficiaries.
TIP offers incentives to those who either own or lease property in any of the declared special development areas of downtown Kingston and any other area designated for development across Jamaica. Applicants must have a perfect record of tax payment.
The incentives included an Urban Renewal Bond, investment tax credit and tax-free rental income available to individuals or companies undertaking capital investments in either land or buildings, whether residential or commercial.
The tax credit may be approved for either the construction of new buildings or improvement to old ones. This is available to approved developers, as a tax credit of 33 per cent on capital sums invested, which is set off against other income tax liability or the developer, from any other source, but limited to 50 per cent of that liability in any one year of assessment.
Full relief from income tax on rental income from the new or refurbished buildings is available to approved developers during the incentive period.
Approved developers are also exempt from transfer tax during the incentive period.
These incentives are intact under the 2015 amendment, Malcolm said.