(Information Extracted from The Gleaner dated 24.07.13)
The Private Sector Organisation of Jamaica (PSOJ) has proposed a realignment of the tariff structure so that industries with the potential to create export earnings or engage in import substitution pay zero tax on importation of inputs used in production of goods and services.
It has also recommended that the corporate income tax rate, with the exception of those which apply to regulated entities such as financial institutions, be lowered from the current rate of 25 per cent to 15 per cent, so that firms can be globally competitive.
Those proposals - including the zero tax for exporters previously raised by Zacca in June - are the main planks of tax-incentive reform work being deliberated through the private sector working group on taxation, and a committee established by Finance and Planning Minister Dr. Peter Phillips to examine the bill known as the Omnibus Tax Incentives Act.
"Revolutionary legislation can be game changing, can be destructive," said Zacca, adding that PSOJ is wholly focussed on the process to ensure that tax reform is game changing but not destructive.
The bill must be tabled in parliament by the end of September and is one of the structural benchmarks set by the International Monetary Fund (IMF) as part of the agreement signed with Jamaica on May 1, this year.
Participating in a panel discussion on tax incentives and reforms in New Kingston on Tuesday, Zacca said Phillips has allowed four members of the private sector to sit on the committee examining provisions of the bill.
They are: Keith Collister, representing the Jamaica Chamber of Commerce; Joseph Matalon, representing the PSOJ; Chris Bicknell, who represents manufacturers; and a representative of the tourism sector.
Zacca, who was addressing the PSOJ Chairman's Club forum, said the committee has been meeting several times weekly.
The new legislation will replace "every single incentive law that is on the books and the Government is precluded from granting any new incentives after December 31, this year," he reaffirmed.
Zacca said the proposal for zero tax on importation of inputs used in the production process apples to, but is not restricted to those involved in business processing outsourcing, tourism, manufacturing, agricultural processing and financial services.
"Secondly, we are recommending that the corporate income-tax rate be lowered so that we are globally competitive with other competitors in the world who are trying to get investors. Everybody is chasing the same investor dollar - and we feel that ... with our high bureaucracy, high crime, high energy, high taxes, we need to get that corporate rate down to 15 per cent," the PSOJ president said.
The corporate rate may have to be lowered in stages, he adds.
"We have proposed and they have agreed, from last year, that regulated entities such as financial institutions stay at the same rate. So the rest would go down. Whether all the rest can go down to 15 per cent right away, they are working on that right now, the incentives working group."
Lowering of the corporate income tax rate to 25 per cent took effect on January 1, this year. However, the rate of 33.3 per cent remain in effect for companies regulated by the Financial Services Commission, the Office of Utilities Regulation, the Bank of Jamaica, and the Ministry of Finance and Planning.
Zacca expressed optimism that Jamaica will pass the first quarterly test under the IMF programme.
"As Richard (Byles) says, we are on the right track," the PSOJ president said, quoting the co-chairman of the Economic Programme Oversight Committee established by the Ministry of Finance to oversee implementation of the IMF programme.
"We think we'll pass the first quarter IMF agreement, that is, the quarter to the end of June. The final figures aren't in yet so it's a qualified think. But, as Richard continuously says, 'we are on a journey from Kingston to Negril and we have reached to (Washington) Boulevard'. But, at least, we are heading west, rather than east, as we have done so often in the past," he added.
In terms of growth going forward, Zacca said "clearly, first and foremost, we need to become a decidedly business-friendly country, something that we are not perceived to be globally at this time."
He also cautioned that "growth in a time of austerity cannot rely on the local market alone ... . We cannot depend on the local market because there is no local-market growth. It's going to be a very flat, if not slightly declining, consumption pattern for the next year or two."
Zacca said "the path for growth should focus on exporting goods and selling services to markets overseas. If we do not target the foreign exchange earning global market, I don't think we can get growth in this country," he email@example.com