Ready to rumble
Published:Friday | January 21, 2011 | 12:00 AM
Former manufacturers' head tackles Gov't on new tax proposal
Daraine Luton, Senior Staff Reporter
A HINT by the Government that it is considering the imposition of duties on imported raw materials has riled a key player in the manufacturing sector, who declared yesterday that the country would be "shut down" should the proposal come to fruition.
Doreen Frankson, past president of the Jamaica Manufacturers' Association, told journalists and other guests at a Gleaner Editors' Forum that Industry and Commerce Minister Karl Samuda revealed the proposed changes at a meeting with manufacturers on Wednesday.
"He informed us yesterday that the Government and the powers that be are looking at putting duty on raw material for capital goods," Frankson said during the forum held at the newspaper's North Street, central Kingston, offices. "Let me say it now that if it happens, this country is going to shut down because we ain't having it."
However, in a swift response, Samuda said Frankson's tone was unfortunate.
"Veiled threats don't intimidate anybody. They serve only as a source of disunity and create nothing but confusion in the minds of those conscientious producers working towards an improvement of the Jamaican economy," Samuda told The Gleaner later in the afternoon.
Under Jamaica's tariff structure, manufacturers importing raw materials pay zero tax on those goods. Goods produced from those raw materials which are then sold locally attract general consumption tax which the manufacturers are required to collect and hand over to the Government. On the other hand, goods being imported from Caricom are not subject to import duties.
A strident Frankson said a removal of the zero per cent duty on imported raw materials would allow Caribbean exporters, such as those in Trinidad and Tobago, to put a dagger in the chest of the local sector.
"Our Caricom partners are not paying any duty and it means that their produce would come in duty-free and ours would be taxable," Frankson added.
She also claimed that the proposal, as articulated by Samuda, would see a lowering of the current tax structure as the tax base would be widened with manufacturers required to pay duty on imported raw materials.
"If that is so, we are going to fight it because it is not happening in Caricom anywhere, as far as we are aware," Frankson said, while wondering aloud whether the proposal resulted from the 2004 tax policy review study.
"Trinidad has already taken over our market and that would only give them more push and that would be the death signal of the manufacturing sector in this country," Frankson added.
Meanwhile, Private Sector Organisation of Jamaica (PSOJ) President Joseph Matalon, who pointed to the 2004 tax policy review, said Jamaica's tax system needed radical change. He said that at the time of the study, a weighted 10 per cent import duty is due on imported goods but, because of waivers, only about five per cent is being collected by the Government.
"What we recommended is that we take advantage of a unification of the tariff structure such that the general levels of duties would come down," Matalon, who chaired that committee, said.
Samuda told The Gleaner that the Government would be reviewing the tax and waiver structure to ensure market competitiveness across sectors.
"We are looking at how best to introduce a strategy that will not place the productive sector at a disadvantage but, in fact, may enhance its position. It will require serious collaboration between the Government and the private sector," he said.