Keith Collister, Contributor
President of the Small Business Association of Jamaica (SBAJ), St. James Chapter, Doris Parchment (right), engages Natasha Parchment-Clarke, public relations officer of the SBAJ, St. James Chapter, and Mark Kerr-Jarrett, president of the Montego Bay Chamber of Commerce and Industry, in discussion at the SBAJ's annual expo at the Montego Bay Civic Centre yesterday. The event was held to highlight the contributions of the small business sector to the development of Jamaica, as well as to showcase products and services available for small business development in the parishes of Hanover, St. James, Trelawny, Westmoreland and St. Elizabeth. - PHOTO BY MONIQUE HEPBURN
PRESIDENT OF the Montego Bay Chamber of Commerce and Industry, Mark Kerr-Jarrett, argues that the environment in Jamaica is still extremely difficult for small businesses. He was speaking with the Financial Gleaner after his address to the Small Business Association of Jamaica in Montego Bay.
"There are a lot of entrepreneurs in Jamaica, but we need to find a way to turn those ideas into jobs. This requires affordable capital and much easier access to credit."
He argued, "Small businesses are extremely important as they are the ones that are going to have to create the job opportunities as the large businesses are now scaling back their work force in order to implement mechanisation and other efficiency enhancing processes."
Of particular concern to Mr. Kerr-Jarrett, however, is the announcement by the Minister of Finance in his 2005 Budget Presentation that, as of January 1, 2006, businesses would only be able to carry forward tax losses for only 5 years, rather than indefinitely as is the case at present.
STALLING JAMAICA'S ECONOMIC RECOVERY
This proposal to put a five-year cap on accumulated losses, says Mr. Kerr-Jarrett, could stall the economic recovery process.
He believes that in some cases the proposed cap would almost be equivalent to taxing losses. For example, taxes on profits might have to be paid even though a company might have a net shareholder's deficit position due to significant accumulated losses over an extended period. In such circumstances, the proposed tax could result in business failures, as companies may be forced to borrow money at high interest rates in order to meet tax liabilities.
More importantly, Mr. Kerr-Jarrett believes the proposed cap would deter other entrepreneurs from starting new businesses, especially in the small and medium size categories, as they would not be guaranteed to recoup their investment and make a profit in the five-year time frame. In deterring small and medium size business creation, it will also prevent any significant job creation opportunities, which these new businesses would have undertaken, keeping Jamaica in a rut of high unemployment and crime.
He believes the proposal could also discourage further Foreign Direct Investment as Jamaica would no longer have a fairly progressive tax regime in this area. From the perspective of Montego Bay, the potential damage to the tourism sector from such a measure would ultimately diminish their tourism revenues and hurt their economy.
Reflecting on his background in agriculture, Mr. Kerr-Jarrett used the additional example of the beef industry. Locally-produced beef requires significant inputs to improve its supply to meet local demand and reduce our dependence on imports and thus our need for foreign exchange. However, it takes five to 10 years to build a viable beef industry, and those farmers who do not get approved farmer status will, therefore, be paying taxes on losses, potentially killing the growth of this sector. Furthermore, in his view, praedial larceny and the inherent risk in this sector already make it less attractive, not to mention the 2004 GCT adjustments, which include most of this sector's capital items. He argues that the successful country of the future may be the one that can produce to feed itself.
In summary, he believes if more taxes are needed they should be garnered through increased compliance and by growing the economy, that is, more new businesses being started, thus generating greater employment and payroll taxes. Nevertheless, he emphasised the need for business people to 'Render unto Caesar what is due to Caesar'.
In view of Mr. Kerr-Jarrett's concerns, the Jamaica Chamber of Commerce's pre-Budget Seminar scheduled for Tuesday, November 29, 2005, at the Hilton Hotel appears to be extremely well-timed.
The main presenter will be the Opposition Spokesman on Finance, Audley Shaw, leading accounting firm PricewaterhouseCoopers and Jamaica Money Market Brokers' Jason Morris.
