McConnell equates CET proposal to grim reaper
Published:Friday | July 8, 2011 | 12:00 AM
Avia Collinder, Business Writer
A government plan to ease taxes on imports continues to get pushback from businesses, which see the move as regressive and likely to hurt domestic manufacturing.
This week the latest pushback is from Peter McConnell, who runs one of Jamaica's largest juice companies, Trade Winds Citrus Limited, who says the proposed roll back of the common external tariff (CET) on imports to 20 per cent would open a floodgate to cheaper agricultural imports and lead to increased competition against local produce and ultimately business closures.
There are some 600 tariff items on which CET above 20 per cent currently applies, the tax reform Green Paper states.
The document acknowledges that the proposals could remove some protections for agriculture.
"Trade Winds is concerned about the proposed reduction of the common external tariff. We are very much in favour of tax reform to widen the tax net and reduce the 'bandoolooism' which is typical of this economy, and increase compliance," said McConnell.
"But, we are totally opposed to reducing the tariff which currently protects agriculture and manufacturers. To cut it to 20 per cent as a way of simplifying the tax system would be devastating to agriculture and manufacturing. If this goes through, we will close our plants. We will not be able to compete."
The chilled-drink company, which operates citrus and other orchards, employs 400 workers but its hirings rise as high as 1,200 in peak season. It also buys fruits and vegetables from some 130 small farmers locally, McConnell says.
Trade Winds owns the popular Tru-Juice and Wakefield brands, among others.
The CET proposal is part of a tax reform plan tabled in Parliament by the finance ministry for discussion. The initial draft proposes different scenarios for a revamping of the tax system, including adjustments to the CET and other border taxes, as well as GCT and income tax.
The finance ministry has already cut the tariff on cars and SUVs from 40 per cent to 20 per cent, and raised it on pick-ups from 10 per cent to 20 per cent. Jamaica does not have an auto manufacturing sector, except for a sole businessman in Negril, Patrick Marzouca, whose company Excel Motors produces the Island Cruiser, though not by mass production.
Last week, new JMA president Brian Pengelley said Omar Azan would continue to lead the committee studying the Green Paper, and whose deliberations would inform the association's official response.
Pengelley, who works with brewery Red Stripe Jamaica as sales director, has said the CET proposal would put local manufacturers at a disadvantage, but that the JMA was ready to take on the tax proposals and other challenges that threaten the sector's eight per cent contribution to GDP and 72,000 jobs.
McConnell told the Financial Gleaner that producers were already being hit by high energy costs - which in his case, he said, has risen 30 per cent year to date - and that any new advantage to imports could be a death knell to business.
"The Government says the proposal is at the Green Paper stage which should mean that they are prepared to listen and take advice. I hope that they will listen and revise," he said.