OPPOSITION senators on Friday joined Government colleagues in giving the nod to the Income Tax (Amendment) Act, 2024 which will incentivise individuals who install solar systems at their primary place of residence, but argued that small and micro-business operations, many of which are run from homes, should not be excluded.

The Bill, which was passed in the Lower House on July 9, sets out the legal framework which will enable individuals to benefit from the income tax credit. It is part of the Jamaica Labour Party Administration’s broader goal of reducing the country’s dependence on fossil fuels while increasing the share of renewable energy in the local energy mix. Jamaica has set a target to achieve 50 per cent use of renewable energy in the electricity generation sector by 2030, and the utilisation of appropriately targeted fiscal measures is critical to achieving this result.

On Friday, Leader of Opposition Business in the Senate Peter Bunting, during debate on the Bill which was eventually passed without amendment, said while the Opposition supports, in principle, incentives to individuals or companies to transition to a more climate friendly source of electricity, the 2024 Bill will create a material incentive, particularly to middle- and upper-income taxpayers.

“Of course a tax credit will mean nothing to those who are at or below the tax threshold and even to those earning marginally above the threshold, [given] the administrative costs and the effort required,” Bunting argued.

“There are so many people now who work from home, who run their businesses from home, that would be excluded,” he said, noting that requirements under the legislation for the electrical work carried out during the installation to be passed by a licensed electrical inspector, and that the property tax for the dwelling be fully paid up at the time of the computation of the tax credit, were further barriers.

“All of these will make those who are only marginally above the threshold not bother to try and take the tax credit. Nevertheless, it will be an incentive for upper- and middle-income persons. What would have been ideal is an incentive system that perhaps would have incentivised suppliers and financiers to be able to finance smaller, lower-, middle-income residential owners to be able to afford solar — because these are the ones who, generally speaking, can’t come with the upfront costs of installing a system even though the payback period can be as low as four to five years,” Bunting told the Senate.

In assessing the policy implications for Jamaica Public Service (JPS) and the customers who cannot access the incentive he said, “What we see happening now is that many large, industrial customers — traditionally big users of JPS power — are putting in co-generation plants. When we add to that the accelerating departure of the large residential customers…what you are going to find is that the revenue base of the JPS is being deprived of a large chunk of customers but the overheads [for JPS] are not reduced — they still have to maintain the distribution infrastructure.”

Added Bunting: “When the overheads are now distributed over smaller residential customers, what that means is that the rate per kilowatt hour will be higher than it usually is and [will] therefore [be] unaffordable for these customers. The other side of that is that the JPS itself will be tempted to under-invest in the transmission infrastructure; there will be more incentive now to underinvest in the transmission infrastructure.”

Bunting, in noting that the Government will have to bolster the distribution company if it becomes insolvent, said “whether it’s being operated privately or not, all of our policy measures need to be done in a way that ensures that we don’t create perverse incentives to underinvest in the transmission facilities and threaten the long-term sustainability of the distribution company”.

He in the meantime said the Manchester Southern constituency, which he said was hardest hit in the parish by Hurricane Beryl, is a demonstration of what underinvestment in the distribution infrastructure can look like, charging also that deep-rural residents have been mistreated by the utility providers — JPS chief amongst them — like children of a lesser god, in the aftermath of Hurricane Beryl on June 3.

“What that tells me is that we are very vulnerable to the transmission system; and how it is being managed now, it is not being adequately maintained and the reinvestment is not taking place. There are many areas that got no hurricane-force winds and [yet] the poles are turned over all over the place. JPS has failed this test and the NWA as well because most of the roads that were cleared the day after were cleared by citizens,” he stated.

Meanwhile, Opposition Senator Sophia Frazer-Binns argued that the definition of “principal place of residence” by the Bill does not fit the Jamaican reality, while batting for the initiative to be opened to small and micro businesses as well.

“When we look at the definition it says, ‘the dwelling house in which the owner primarily resides, and excludes a dwelling house that is primarily unoccupied, occupied by a tenant to the exclusion of the owner, or occupied by any other person outside of the owner’. I have a problem…we have situations where persons may live somewhere else but pay the property tax, they pay utilities, and their children or their parents live in that place. I can’t understand why those persons could not benefit as well. I am asking that we take a second look at the phrase,” she said.

Government Senator Dana Morris-Dixon, who piloted the provision through the Senate, said the suggestion that small businesses should be included was accepted.