Thu, 19 Jul 2018 02:00:20 -0400
Gov't looking at stamp duty/transfer tax effect on NHT transactionsBY BALFORD HENRY
Leader of Government Business in the Senate, Kamina Johnson Smith, assured members recently that the Ministry of Finance and the Public Service is actively reviewing the effect of stamp duty and transfer tax charges on National Housing trust (NHT) transactions.
Senator Johnson Smith made the announcement while wrapping up the debate on amendments to the Income Tax Act, the Stamp Duty Act and the Transfer Tax Act to allow for a tax exemption for listed companies on the Jamaica Stock Exchange to repurchase their shares.
She said, however, that while she could assure the senate that the issue was being reviewed, she was not in a position to say how feasible it was for changes proposed by several stakeholders to be made.
Senator Johnson Smith was responding to concerns raised by Government Senator Kavan Gayle, who sits on the NHT board.
Senator Gayle, who is also president of the Bustamante Industrial Trade Union, had raised the issue that the NHT is a statutory body incorporated under the National Housing Trust Act which, as part of its functions, develops housing schemes for sale to its contributors.
He noted that part and parcel of this function is the acquisition, subdivision and sale of land. However, under the Transfer Tax Act and the Stamp Duty Act, transfer tax and stamp duty are generally payable on conveyances and transfers of land and pursuant to the Registration of Titles Act; proof of payment of these amounts is required as a prerequisite to their registration by the titles office.
He also pointed out that the minister of housing, under whom the Housing Agency of Jamaica falls, does not pay transfer tax or stamp duty when land is being sold. However, the NHT, although a government agency, does not benefit from that exemption.
Senator Gayle suggested that, as a government agency charged with increasing the housing stock in Jamaica and providing housing solutions for is contributors, in reviewing the Stamp Duty Act the following be considered:
1. NHT be exempted from stamp duty when it is selling land, similar to the exemption granted to the Minister of Housing; and,
2. Where Cabinet has directed that the NHT take over developments, for example memoranda of understanding with SCJ(Sugar Company of Jamaica) Holdings, the NHT should be exempt from transfer tax and stamp duty or, at the very least, the sums payable should be assessed on the value of the land at the date the purchasers acquired same, and not at current market value. He noted that, currently, the NHT is forced to absorb the costs to complete sales to persons who purchased the land from the original developer
3. NHT be exempted from stamp duty where properties assigned to beneficiaries have to be re-transferred to the NHT for a variety of reasons (for example where the property has been transferred, but the beneficiary has not taken possession of the unit and same has to be sold to a new purchaser to recoup the sums incurred by the NHT. Currently, the NHT has to pay duties twice on the same unit, which it will not be keeping for its own benefit.
4. NHT be exempted from stamp duty where the Trust is rectifying incorrect registration by way of a Transfer by Way of Exchange.
The Senate approved passing the companion measures allowing for companies listed on the Jamaica Stock Exchange to be exempt from paying income tax, stamp duty, and transfer tax on share buy-back transactions.
Senator Johnson Smith, who is also minister of foreign affairs and sfreign trade noted that, at present, an ordinary shareholder engaging in a share buy-back transaction is at a disadvantage, compared with a shareholder selling shares to a third party.
She argued that a shareholder selling shares to a third party pays no stamp duty, transfer tax, or income tax, while the shareholder who engages in a share buy-back option would be taxed.
She said the legislation was approved by Cabinet on the basis that there is little to no fiscal implications whatsoever.
“The amendments will assist with the ease of doing business. It will assist in increasing liquidity in the markets, and, perhaps, increase the desire to move towards a regional stock exchange. We all know now that there are cross-listings which are permitted and facilitated by technology,” she noted.
Senator Johnson Smith argued that companies that are able to repurchase their stocks as one of the mechanisms available to them, employ more people, pay more taxes overall, and generally contribute to economic prosperity.
She added that similar legislation have been implemented within the Caribbean and other developed countries.
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