Editorial | Get CARICOM in on digital GCT

While Jamaica has unimpeachable economic and moral logic for applying its general consumption tax (GCT) to digital services provided by firms that have no presence in the island, the island’s government should strategise closely with its Caribbean partners on its implementation of the levy.

Barbados should perhaps be its first port of call. Like Jamaica’s proposal, their value added tax (VAT), by law, also applies to external-supplied digital services. But more broadly, Jamaica should use this issue as a driver for accelerating, hopefully to urgent implementation, the Caribbean Community’s (CARICOM) decade-old idea of establishing a single regional ICT space.

These suggestions are not, as some might claim, mere sops to regional integration, or promotion of CARICOM. As limited as it might be, there is potential value of insulation to Jamaica if it acts in concert with the region on this matter.

The point is that Jamaica should expect pushback to its plan by the big American digital services companies, possibly to the point of asking the Government to lean on the island. In that event, CARICOM acting together will be a better stead to withstand the pressure.

This concern is neither fearmongering nor uninformed speculation. There is much evidence globally of Big Tech baulking at having to pay taxes, including VAT, in countries where they have no brick and mortar presence, and of the Trump administration acting in their support.

NON-RESIDENT PROVIDERS

A week ago, Fayval Williams, the finance minister, announced her intention to apply GCT (a 15 per cent tax on most goods and services consumed in the economy) to “digital services and intangibles supplied from abroad and consumed in Jamaica”. This is part of the efforts to raise over J$18 billion in new taxes to close a hole in the Government’s budget after Hurricane Melissa’s destruction last October.

The arrangement will come into force in the last quarter of the new fiscal year (1 April, 2026- 31 March, 2027) and is expected, in the first instance, to raise J$300 million and J$4.2 billion in 2027/28.

Ms Williams did not disclose the mechanisms by which Jamaica will collect the tax or whether the normal 15 per cent rate will apply to the targeted service. However, Jamaicans can expect to pay GCT when they pay for downloads from streaming services like Netflix or Spotify, or perhaps when they buy goods on platforms such as Amazon, AliExpress, Shein or EBay.

The move is logical. Jamaicans already pay GCT on digital services and intangibles provided by domestic suppliers, but bypass the tax on similar services when they are applied by companies abroad. In that sense, the market is weighted in favour of foreign service providers, who suck money out of the domestic economy but pay no taxes locally. Neither do they provide employment in Jamaica.

Or, as Ms Williams put it in the revenue measures paper she presented to Parliament: “Digital services now form a growing share of everyday consumption by Jamaican households and businesses. Many of these services are supplied by non-resident providers with no physical presence in Jamaica, resulting in inconsistent application of GCT under existing rules.”

The principle of consumption taxes applying where goods and services are consumed, as the finance noted, is well developed. But resistance to paying corporate taxes, or remitting taxes of any type, to any jurisdiction where they earn money, but are not physically resident, has been a feature of the big technology companies that has played out often in Europe, Asia and the Pacific.

The Australian government, the European Union, France and Canada have, in recent years, been in fights with the American Big Techs over various forms of tax applicability. In other cases, it is over whether companies like Meta (Facebook and others) and Alphabet (Google) should pay domestic media for the content they generate, which helps to drive traffic to, and enhance the relevance, of the global platforms.

COMMON CAUSE

A year ago, speaking as the chairman of CARICOM, Barbados’ prime minister, Mia Mottley, estimated that across the Caribbean, including the Dominican Republic and Puerto Rico, these platforms earned US$11.6 billion a year. Yet, she said, “they pay no taxes and contribute in no way to the regional economy”.

In the meantime, Caribbean countries struggled to upgrade ageing ICT infrastructure and to advance their technologies to modernise their economies. The Grenadian prime minister, Dickon Mitchell, was mandated by his colleague heads of government to lead the search for solutions to this issue, including the proposal for the single ICT space, which has been on CARICOM’s agenda since 2017.

The matter is more relevant now. Of the CARICOM members, Barbados VAT legislation specifically mentions its application to external digital services providers. The broad reading of the VAT laws and regulations of other territories suggest that this application is possible.

It is in Jamaica’s interest that other countries are on board with its plans, and so that the region can make common cause in defending any assault by Big Tech or the Commerce Department. It is also in the interest of other countries that there is a unified CARICOM position on the question. For as Minister Williams pointed out, an increasing number of transactions on Caribbean economies are conducted digitally. And with digital applications there are no borders.