ICT companies fear loss of free zone incentive – Jamaica Gleaner

Removing incentives from the business processing outsourcing (BPO) industry, whose operations are largely centred in the Montego Bay free zone, is among implicit stipulations in the International Monetary Fund (IMF) agreement, but the chief spokesman for BPO companies said it could wipeout the sector.

“Changing incentives that are going to literally wipeout an industry is not the right direction,” said president of the Business Processing Industry Association of Jamaica (BPIAJ), Yoni Epstein.

The BPO sector currently employs 13,000 to 14,000 persons, with 90 per cent of the operations established in the Montego Bay area, according to Epstein.

The BPIAJ president said companies in his sector were already facing costs amounting to thousands of US dollars to, among other things, undertake background checks and fingerprinting of potential employees – requirements under the law in the BPO industry for operating in the free zone.

Epstein raised his concerns at a forum hosted by the Private Sector Organisation of Jamaica (PSOJ) on tax reform and the new Omnibus Tax Incentives Act to be tabled in Parliament by the end of September.

The new law will replace every incentive law on the books, including inducements applicable to firms operating in the free zones.

“So you can imagine when the tax reform comes in and taxes change for the industry,” Epstein said.

PSOJ president Christopher Zacca has said that the BPO sector was among those for which the PSOJ has been lobbying for a zero tax on importation of inputs used in production of goods and services.

According to information on the website of Jamaica’s trade and investment agency, JAMPRO, free-zone status enables manufacturers and service providers (in the case of informatics free zones) to benefit from the exemption from income tax on profits in perpetuity, as well as import duties and licensing.

SPECIAL PROVISION

There also exists a special provision under this Jamaica Export Free Zone Act, which permits the repatriation of foreign exchange by overseas investors to its parent company without any form of recourse on the part of the government.

The IMF conditionality on tax waiver reform does not specifically mention companies operating in free zones.

However, it stipulates a de minimis cap on granting new discretionary waivers that excludes those granted to charitable organisations and for charitable purposes, or those required to satisfy the Government’s already existing contractual or legal obligations, including specific contracts for state projects.

The de minimis cap has been set at J$10 million monthly but unused amounts in any month does not raise the cap in subsequent months.

mcpherse.thompson@gleanerjm.com