Tax regime could affect tourism workers’ pension scheme
THE long-discussed pension scheme for tourism workers, which is to start in another six months, could be negatively impacted due to the Government’s new property tax regime, which major players in the tourism industry say have hit hoteliers very hard.
Speaking at a press conference on Friday, Omar Robinson, president of the Jamaica Hotel and Tourist Association (JHTA), stressed the importance of the pension plan.
“But when it comes down to dollars and cents, we are either going to break the law and pay the pensions, or we are going to pay the property taxes and can’t do the additional benefits for the staff,” he said.
Cabinet late last year approved the pension plan for tourism workers for it to come on stream this September and gave approval for amendments to the Tourism Enhancement Fund (TEF) Act to enable it to set up the pension fund.
The pension scheme is supposed to benefit a range of tourism workers, including attraction workers, hotel workers, craft traders, red cap porters, ground transportation operators, and port workers.
The $1 billion which was earmarked for the TEF pension fund has already been approved, but the JHTA says the tax rates which vary so widely from one property to the next may very well put a spoke in their plans for pension benefits. The association claims that the newly computed rates have skyrocketed increases as far as 980 per cent.
As of April 1, the property tax rate is to be reduced from between 1.5 per cent and 2.0 per cent, down to 0.8 per cent, with a cap at 1.3 per cent. The Government says this will see more than 272,000 property owners benefiting from a reduction in property taxes.
Finance Minister Audley Shaw said the property tax liabilities will be based on the adoption of the 2013 valuation roll, as property taxes have not been adjusted to take account of the 2013 valuation and the current rates are being paid on the 2002 valuations.
Director of business process and administration at Sandals Resorts, Wayne Cummings, argued that while the computation amounts to a reduction in the percentage rates, and the value of properties would therefore be increased in real terms, property owners will still face significant challenges.
He said one of the property’s rates had been increased by 450 per cent, pushing the annual payment from $4 million to $20 million.
“So in real money, even though your asset may be going up, that’s a book entry, but that makes no difference to you paying your bills tomorrow. It may have been well-intentioned by the Government, [but] let’s have a conversation about how they zone the country so that we can determine what makes sense for business,” he said.
The JHTA executives also noted that the GCT on group health insurance, which also forms part of the Government’s just-announced tax package, will impact the industry’s ability to set up pension schemes for their workers, as promised. The pension plan is to start at three per cent contribution, to be increased up to five per cent over three years.
“That cost will now have to be balanced with having to pay health insurance, so the Government needs to choose,” Cummings remarked.
The association says the Government should instead consider how to get people with private health insurance plans to use those benefits in the public health system.
Robinson argued that while some employees could opt to drop health benefits, another problem is that the costs for employees with multiple dependents will be driven up.
“It will be passed on to the employee and not the employer. With an average of two to three dependents, the employee will pay an additional $2,000 to $3,000 more per month,” he reasoned, pointing out that the Government was giving its $1.5-million tax break with one hand, whilst snatching it away with taxes.