GOVERNOR of the Bank of Jamaica (BOJ) Richard Byles said the prime minister’s bid to use tax incentives to lure companies to “repatriate [their] businesses to Jamaica, including their assets and profits” is due to the “miracle that has occured in the Jamaican economy in the last 10 to 12 years”.

Byles outlined his thoughts on the proposal made by Prime Minister Andrew Holness during his “The Next Chapter: Pivot to Inclusive Growth” presentation made to business leaders, in response to queries from the Jamaica Observer at his last press briefing on November 21.

“The fact is that, I guess, historically, many Jamaicans have held assets abroad, and I would say in the old-time days, they did so primarily for reasons of security. They wanted to know that when they wanted their foreign-currency assets, they can get it. I don’t think that is the case so much today. I think, pretty much, everybody feels comfortable that the macroeconomic situation in Jamaica is such that they can keep assets here and be comfortable that they can have access to it whenever. It’s one of the great achievements in the kind of miracle that has occured in the Jamaican economy in the last 10 to 12 years,” Byles said.

“There is also a tax side to it or a tax incentive to keep it elsewhere,” he added in outlining the reasons Jamaicans, who can, elect to keep “assets and profits” outside the country, chiefly through an international business company (IBC) registered chiefly in St Lucia or Barbados.

“As you probably are aware, not all the countries have the same tax rate and so, to the extent that there are countries with lower tax rates, it tends to attract funds there.”

“So I presume that the prime minister is looking at this issue holistically and is sensing that comfort with being an investor in Jamaica is strong and good, and that maybe some tweaking of the tax programme will allow some of those funds to come back to Jamaica and I think that if we can swing that, it would be a positive thing for the country, no doubt,” Byles said without elaborating further.

For Sydney Thwaites, president of the Jamaica Manufacturers and Exporters Association (JMEA), there was a mixed bag of optimism and caution regarding the prime minister’s proposal to incentivise companies to repatriate their assets and profits to Jamaica. On one hand, he doesn’t see anything negative in the proposal and believes it’s a good thing to provide incentives to local companies with IBC affiliates to keep their assets in Jamaica.

However, Thwaites is also expressing uncertainty about the proposal’s potential impact to drive significant, transformational growth in the Jamaican economy.

“Is this enough to have the impact we want to make our economy grow, to have that significant, transformational growth? We are unsure if anything is in there impactful enough,” he told the Business Observer.

“While we are supportive of the initiative, we still want to see something more transformational and impactful to the issues that businesses are having today,” he said, citing the cost of energy, crime and a tightening labour market as issues that need to be solved to help generate growth.

Other business leaders contacted for comment declined to offer any, stating they will stay clear of the subject until further information comes about.

Meanwhile, Adrian Stokes, a financial economist and CEO of Quantas Capital, an alternative investment firm, outlined various tax laws that would have to be overhauled if the dream of getting companies to repatriate their businesses, including assets and profits, to Jamaica is to be realised.

“The Government will need to solve the [issue of] withholding tax on dividends if it is serious about Jamaica being a financial or economic hub in the region. This is a perennial issue that makes it disadvantageous for investors to domicile in Jamaica,” Stokes said of the tax that is charged on dividends.

“Companies pay corporate income tax on their earnings and are again taxed when those net earnings are paid in the form of dividends to shareholders,” he continued as he raised issue about a topic that has come up for discussion every so often, but has so far been ignored.

Tax on dividends earned the Government $3.2 billion during the 2023/24 fiscal year that ended March 31, 2024. For the first seven months of this current 2024/25 fiscal year — April to October — the Government has already collected $2 billion from the tax on dividends.

But discontinuing the withholding taxes on dividends is not the only tax reform Stokes pointed out that needs to take place to incentivise Jamaicans to return businesses to the country.

“The rate of corporate income tax will also need to be looked at. On this issue the Government can be guided by developments in the international financial architecture where 15 per cent is seen as a minimum acceptable tax rate for a country not to be seen as a tax haven,” Stokes said, in his written responses to the Business Observer.

The 15 per cent minimum business tax was agreed in 2021 with countries implementing it in January 2024. Currently, Jamaica has a differentiated tax sytem for corporations depending on whether a company is regulated or not. For regulated entities such as financial institutions and the Jamaica Public Service Company, the tax rate is 33 1/3 per cent while every other company pays 25 per cent.

“A clear economic analysis will need to be done to show that having more companies paying 15 per cent is net beneficial to the country than a few companies paying 25 per cent and 33 1/3 per cent for regulated companies in the financial sector,” he pointed out.

Another area of angst he said is just making it easier for companies to pay taxes.

“[It] is also a big incentive for companies to see Jamaica as an excellent environment to do business in. For example, making it easier for a group of companies to file one consolidated GCT return.”

Implicit in Stokes’s reasoning is a push to look beyond just Jamaican companies repatriating their “businesses, including assets and profits” to Jamaica but to go after companies looking for countries with tax regimes that are more favourable than what exists in their home countries.

In the region, Jamaica would be going up against British Virgin Islands, Cayman Islands and Bermuda, all of which have no corporate income tax, and in some cases, no taxes on interest, dividends or royalties earned on investment, enabling them to attract subsidiaries of US Fortune 500 companies such as Pepsi, Marriott, Wells Fargo, Google and Nike to park billions in accounts in them. Then there are other countries like Barbados and St Lucia which seem to be the favourite of Jamaican companies with fairly low tax rates.

Stokes told the Business Observer that if the tax changes are implemented, the country could go after global corporations in the financial services sector, including insurance.

“There’s also a large Trust market that Jamaica can go after. This includes wealth planning, making it efficient for families to bequeath wealth to the next generation in a secure and confidential manner,” Stokes added.

Research shows the global trust and corporate services market is valued at US$10.5 billion with projections that it could be valued at between US$18.5 billion to US$21.1 billion by 2032, driven by rising regulatory requirements and rising entry hurdles. The Bahamas and Cayman Islands are strong regional players in this market.

But like those countries are often labelled, Stokes points to the risks the country could face.

“One of the major issues with establishing a country as a financial or economic hub is it being designated as a tax haven. On this, Jamaica can manage the risks by ensuring there are economic or substance tests to prevent the creation of ‘shell’ companies. Jamaica can also adopt OECD standards as it relates to rates of corporate income tax. For example, ensuring that the effective corporate income tax rate doesn’t fall below 15 per cent,” he said.

He noted that, though there are several islands in the region offering tax incentives to attract business, Jamaica has a number of advantages that will give it a competitive leg in the race to be the leading destination in the region for companies to be domiciled and add to the growth the prime minister is seeking.

“Jamaica is well positioned. It has a highly developed corporate sector with highly competent professionals — attorneys, lawyers, and general business services providers. Jamaica also has the deepest financial market in the Caribbean region… These are important advantages that would almost certainly give Jamaica an opportunity to leapfrog other territories.”

The Government’s policy to position Jamaica as a place where companies can be headquartered can be catalytic from a growth perspective, Stokes argued further.

“The tax revenues to be collected from more companies paying a lower effective tax rate can be redirected to improve critical services like health and education. The jobs to be created are high-value, knowledge-based ones that will command attractive incomes. Overall, this can be one of the strategic pillars to move Jamaica from a low-growth, low-income economy to one that places greater emphasis on human capital growth and higher income,” he stated.