(Jamaica Observer) Local bankers say Government’s tax policy is threatening the viability of the financial sector.
The Jamaica Bankers Association (JBA) yesterday lashed out at the authorities, one week after Finance Minister Dr Peter Phillips announced new measures for the 2012/2013 fiscal year to raise just over J$23 billion to plug the gap in the Budget.
The bankers said that while they support the general objective of the Government and recognise that they must share the country’s economic burden, the recent tax package was grossly unfair and excessive against financial institutions.
“Based on what was presented last week the financial sector will bear a large portion of the tax revenue requirement presented,” the JBA said in a press release.
They were particularly peeved that the Government implemented an asset tax of 0.2 per cent and a five per cent withholding tax on dividends while maintaining Corporate Income Tax (CIT) rates at 33 per cent level for the sector.
“Considering the CIT at 33 per cent, the withholding tax on dividends of five per cent, and the asset tax — which equates to approximately five per cent of profits for some financial companies — the financial sector is being asked to pay a significant tax rate,” said the JBA. “This disparity threatens to jeopardise the retention of capital within, the flow of new capital into, and the overall competitiveness of the financial sector if it is prolonged.”
The JBA noted that it has always supported the Government in its quest to find solutions to address the structural economic imbalances and to generate growth. This commitment was displayed in 2010 in the Jamaica Debt Exchange, said the bankers.
“A vibrant financial sector is critical to a country’s economy, especially one that is on a path of recovery,” said the JBA. “Jamaica’s banks continue to play a pivotal role in the financial and labour markets, as well as in the consumer lending and business environment spaces of the country.”
The JBA’s criticism of Government comes as the Jamaica Hotel and Tourist Association continues to press the authorities to rethink the impending new taxes.
