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No change to bauxite levy regime

Published:Thursday | March 16, 2017 | 12:00 AMMcPherse Thompson

The Ministry of Finance has assured Auditor General Pamela Monroe Ellis that there will be no change to the taxation regime for the bauxite sector for fiscal year 2017-18.

The assurance was given after she noted that the Fiscal Policy Paper for 2017-18 indicated a change whereby the companies move towards the payment of profit tax or profit sharing and away from the payment of a levy.

However, in conducting her assessment, she sought to clarify the nature of the change in the tax regime. The ministry, she said, subsequently informed her that there was no change in the taxation regime.

In this regard, Monroe Ellis said, the ministry's representation to her does not conflate with the narrative in the policy paper and therefore she suggests that the necessary correction be made.

"Based on the ministry's confirmation that there was no change in the taxation regime, the ministry should make the necessary correction to the Fiscal Policy Paper," she said in an independent assessment report tabled in Parliament on Tuesday.

In an assessment of revenues and grants for fiscal year 2017-18, the paper said there will be no payments of the bauxite levy based on the new agreements with the owners of Alpart and Noranda.

"These agreements reflect a change in taxation regime for the bauxite sector wherein the companies move towards the payment of profit tax or profit sharing and away from the payment of a levy," it said.

The Government has indicated that the provisional intake from the bauxite levy for the fiscal year to December 2016 was $1.83 billion relative to the budgeted $1.98 billion, a shortfall of $150 million.

In comments on the matter given to the auditor general, the Government explained that the shortfall was due to the downturn in crude bauxite production, reduced demand for bauxite from the United States and delays in the reopening of Alpart.

Monroe Ellis adjudged that explanation to be reasonable. She said available crude bauxite data taken from the Bank of Jamaica for April to September 2016 indicates that production levels were 22.9 per cent lower relative to the corresponding period of fiscal year 2015-16.

"This would negatively affect bauxite levy collections, which are based on production," she said.

The bauxite levy was budgeted at $2.81 billion for fiscal year 2016-17, representing a 33.1 per cent increase over the $2.11 billion out-turn for fiscal year 2015-16, according to amendments to the 2017-18 Fiscal Policy Paper also tabled in Parliament.