Opposition wants timeline for phasing out asset tax

Senators on both sides of the political divide yesterday locked horns over a timeline for eliminating the asset tax paid by financial institutions, which should have been phased out about a decade ago.

Members of the Upper House were debating two bills – the Income Tax Amendment Act, 2026 and the Asset Tax (Specified Bodies) (Amendment) Act – which provide for a limited adjustment to the annual filing and payment dates of both taxes, moving the final returns and payment dates from March 15 to April 15, starting with the 2025 year of assessment.

The bills received the nod from senators.

Leader of Government Business Senator Kamina Johnson Smith, who piloted the two bills, said the change, which only applies to corporate income tax and asset tax, is intended to reduce compliance pressure, to improve administrative coherence and better align revenue realisation with fiscal planning.

In his contribution to the debate, Opposition Senator Ramon Small-Ferguson urged the Government to outline a clear plan of how it intends to phase out this disproportionate asset tax.

According to Small-Ferguson, the administration should commit, in the context of fiscal conditions normalising post-Hurricane Melissa recovery, to “a clear plan to phase out this distortionary tax – the plan should be time-bound and should be legislated – it is clear that if it is not legislated it won’t happen”.

He said amending the filing and payment date for the asset tax misses the central issue in relation to the measure.

The real issue is not when the tax should be paid, said the Opposition senator, noting that what should be taken into account is whether the tax which is currently a burden to financial institutions, its customers and shareholders, should continue to exist.

‘PROBLEMATIC’ TAX

Describing the asset tax as problematic, Small-Ferguson said the measure does not tax profit, but taxes the mere existence of capital.

“You are being punished for putting capital to work in the economy,” he added.

“Even in difficult times, even when margins are tight, even when institutions are trying to support recovery as all financial institutions should be doing right now, the tax remains,” he said.

Further, Small-Ferguson said the tax shows up in higher borrowing costs, lower dividends to all investors including pensioners and reduces the investment capacity of financial institutions.

“It affects the ability of Jamaicans to borrow, earn, to invest and to save ultimately. It works against economic growth,” he argued.

Government Senator Keith Duncan conceded that stakeholders, the International Monetary Fund and the administration, have all acknowledged that the asset tax is burdensome and distortionary.

However, he said the finance minister has committed to having the tax removed once the country’s fiscal dynamics improve.

He noted that the country was facing severe fiscal pressures at this time and indicated that it would be premature to give a timeline for phasing out the tax.

Duncan said it was still early days in relation to the impact of Hurricane Melissa and the Government has to review its fiscal position, monitor and manage the recovery efforts and, at an appropriate time, revisit the question of removing the asset tax.

Senator Donna Scott-Mottley, leader of opposition business, said the tax was supposed to be a temporary measure in 2012, yet the then Opposition was strongly opposed to it at the time.

DISMISSED ARGUMENT

She dismissed the argument about a need to have the asset tax remain because of the devastation caused by Hurricane Melissa.

“If the Government had really been convinced that this tax is distortionary; that it affects the financial sector and that funds could have been used to drive the economy and assist us on the pathway to growth … how can you say 10 years later you have to keep it because of Melissa. It should have been lifted a long time ago and we should have been looking to other sources to recover from the hurricane,” she declared.

Senator Aubyn Hill, minister of industry, investment and commerce, said while he understood the argument about the need to remove the asset tax, he has to look at how it benefits Jamaicans on a national scale at this time.

“The heavy weather that is being made of the asset tax so soon after Melissa is unwarranted,” he said.

Hill said the Bank of Jamaica has assured the Government that the financial sector is strong and profitable.

Johnson Smith said the Government was committed to reducing and ultimately eliminating the asset tax requirement for financial institutions as fiscal space allows.

She indicated that, with a $134.6-billion deficit, the fiscal circumstances would not allow for the tax to be removed at this time.

“When we manage the budget overall, it is about tough decisions. The Jamaican people understand,” she added.

edmond.campbell@gleanerjm.com