IMF Update: Structural Benchmark Met – Omnibus Incentive Bills Tabled

Photo Courtesy: Winnfm & JamaicaStores
Photo Courtesy: Winnfm & JamaicaStores

Yesterday, October 29, 2013 Minister of Finance Peter Phillips tabled the Fiscal Incentives [Miscellaneous Provisions] Act 2013 and the Income Tax Relief Act [Large-scale Projects and Pioneer Industries] Act 2013.

The tabling of the Bills satisfies a key structural benchmark under the arrangement with the IMF. The Memorandum of Economic and Financial Policies (MEFP ¶34) stated that the Omnibus Tax Incentive Act should have been tabled in the House of Representatives by September 30, 2013. However, the original deadline for the completion of the Bill was waived with permission by the IMF, as announced by the Minister in the House on September 24, 2013. He cited the reason for the delay as being due to concerns that were raised by local stakeholders and international partners that were being addressed.

Objectives of the Reform

In addressing the House yesterday he outlined and explained the main objectives of the reform of the incentives. The main objectives of the reform are as follows:

  • To eliminate the existing sector-based incentive programmes
  • To transition to a generally competitive business regime
  • To provide incentives for employment and capital investment
  • To introduce a Rules based and non-discretionary system
  • To incentivize compliance
  • To minimize tax-induced increases in production cost or the cost of doing business

The Fiscal Incentives [Miscellaneous Provisions] Act 2013

As the per the original document here are the objects and reasons for this Bill:

The Bill seeks to-

Amend the Income Tax Act to include new fiscal incentives that are of general application and enhance existing fiscal incentives under that Act. Amendments to the Income Tax Act include –

  • Fixing the corporate income tax (“CIT”) rate at 25% for all unregulated companies; the CIT rate for regulated companies to remain at 331/3%;
  • The introduction of an Employment Tax Credit against income tax payable by companies and individuals carrying on a trade, profession or vocation.

Repeal certain enactments that grant fiscal incentives to specific sectors of the economy. The following enactments are repealed: –

  • The Cement Industry (Encouragement and Control) Act
  • The Export Industry Encouragement Act
  • The Foreign Sales Corporation Act
  • The Hotels (Incentives) Act
  • The Industrial Incentives Act
  • The Industrial Incentives (Factory Construction) Act
  • The International Finance Companies (Income Tax) Relief Act
  • The Motion Picture Industry (Encouragement) Act
  • The Petroleum Refining Industry (Encouragement) Act
  • The Resort Cottages (Incentives) Act
  • The Shipping (Incentives) Act

The Bill further seeks to make extensive amendments to the capital allowance provisions in the First Schedule to the Income Tax Act.

The Bill also introduces a Fifth Schedule to that Act to make provision in relation to companies admitted on the Jamaica Stock Exchange Junior Market platform.

As a revenue-protection measure, the Bill would limit the amount of prior-year that could be deducted from income.

With regard to enactments that are to be repealed, the Bill provides that persons who are entitled to incentives for a period of time specified pursuant to a repealed enactment would be given the  choice of continuing that entitlement or electing to benefit from the new incentives regime.

This Bill is a companion measure to a package of fiscal incentive measures, including –

(a) The Income Tax Relief (Large-scale Projects and Pioneer Industries) Bill;

(b) A Customs Tariff (Revision) (Amendment) Resolution (Not yet tabled);

(c) A Stamp Duty Act (Amendment of Schedule) Order (Not yet tabled).

Click here to read the full document – Fiscal Incentives Bill_ October 29_2013 – FINAL

The Income Tax Relief (Large-scale Projects and Pioneer Industries) Act 2013

As the per the original document here are the objects and reasons for this Bill:

This Bill would provide for the ministerial designation of certain projects as approved large-scale projects or certain economic activities as approved pioneer industries, and the granting of specified income tax incentives in respect of approved projects or pioneer industries, subject to any conditions in the order.

The Bill provides that a company may apply to the Minister to be granted a certificate of approval designating the company as an approved participant in relation to an approved project or approved pioneer industry for the purposes of the Act, subject to such terms and conditions as the Minister thinks fit.

The Bill also provides for the amendment of a certificate of approval, and for cancellation of the certificate in the event of contravention or failure to comply with terms and conditions of the certificate.

Finally, the Bill contains a provision enabling the Minister to make regulations generally for giving effect to the provisions of the Act and for various specific purposes.

Click here to read the full document – _Fiscal Incentives__Income Tax Relief Mega Projects Bill Revised OPC Oct 27 2013 FINAL

Remember to check out diGjamaica’s IMF Special Report – the only online portal that covers Jamaica’s relationship with the IMF and monitors the implementation under the 2013 approved Extended Fund Facility.

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