Taxing manufacturers not a recovery strategy, says JMEA

The Jamaica Manufacturers and Exporters Association (JMEA) is expressing serious concern over the government’s decision to expand the Environmental Protection Levy to 100 per cent of manufacturers’ sales, warning that the measure could weaken the competitiveness of locally produced goods and inadvertently favour imports.

The change, introduced as part of the government’s 2026-2027 fiscal package, is projected to generate approximately J$3.6 billion in additional revenue. While acknowledging the government’s need to raise funds for national recovery efforts, the JMEA in a statement cautioned that the policy could have unintended consequences for one of the country’s most productive sectors.

Under the current tax structure, the environmental levy is applied differently to imports and locally manufactured goods. Imports are taxed at the CIF value at the port of entry, before distributors and retailers apply their mark-ups. Manufacturers, however, pay the levy on the final sales value of their products.

Historically, this disparity was partially addressed by applying the levy to 75 per cent of manufacturers’ sales, reflecting the estimated 25 per cent mark-up typically applied to imported goods after they enter the domestic market. The new policy removes that adjustment, meaning manufacturers will now pay the levy on 100 per cent of their sales.

According to the JMEA, this change effectively increases the tax burden on local producers relative to imports competing on the same shelves.

“This change is not a simple technical adjustment,” said Kathryn Silvera, president of the JMEA. “It fundamentally alters the competitive balance between locally produced goods and imports. At a time when Jamaica needs to strengthen domestic production and expand exports, policies that penalise manufacturers move the economy in the wrong direction.”

Manufacturers warn that the increased tax burden will translate into higher production costs, reduced margins, lower export competitiveness, and potentially higher prices for consumers.

Manufacturing plays a critical role in Jamaica’s economy, generating value-added exports, creating stable employment, and supporting interconnected sectors, such as agriculture, logistics, retail, and services. Industry leaders caution that when policies raise the cost of local production, the effects ripple throughout the broader economy.

Over time, this dynamic can result in imports gaining market share while domestic production weakens, with implications for jobs, foreign-exchange earnings, and national economic resilience.

The concerns come at a time when the government is seeking to mobilise additional revenue following the widespread damage caused by Hurricane Melissa, which is estimated to have resulted in approximately US$8.8 billion in losses, or about 41 per cent of GDP. The 2026-2027 National Budget includes tax measures expected to generate roughly J$29.6 billion to support recovery and reconstruction efforts.

While the JMEA recognises the importance of fiscal stability, the association argued that the design of tax policy is just as important as the revenue it generates.

“Increasing the environmental levy on manufacturers may raise revenue in the short term, but it risks weakening the very sector that generates jobs, exports, and economic growth,” Silvera added.

The association also noted that, globally, many export-oriented economies adopt tax policies that avoid placing additional burdens on domestic production, particularly where exports are concerned. In several jurisdictions, exports are zero-rated or exempt from consumption-based taxes to maintain international competitiveness.

The JMEA said it was therefore urging the government to reconsider the policy and adopt a more balanced approach that supports environmental objectives and economic growth.

The JMEA reaffirmed its willingness to work with policy-makers to refine the measure and develop solutions that promote sustainable growth while protecting Jamaica’s productive capacity.

“Jamaica cannot build a resilient economy by taxing the industries that create wealth,” Silvera said. “Our growth strategy must support production, investment, and exports, not make them less competitive.”

RECOMMENDATIONS PUT FORWARD BY THE JMEA

· Maintaining the discounted levy base for manufacturers to preserve parity with imports

· Exempting or deferring exports in line with international best practice

· Ensuring that environmental tax policies do not inadvertently weaken productive sectors