Ashford W. Meikle, Staff Reporter
STREET-FORREST
SOME INVESTORS are nervous about the latest decision by the Jamaica Central Securities Depository (JCSD), which requires shareholders to provide their taxpayer registration number (TRN) for transactions with the Jamaica Stock Exchange (JSE).
In a letter dated January 3, 2006, the JCSD informed shareholders that it "now requires that clients with accounts at the JCSD provide the directory [with] mandatory information [including] tax registration number."
The JCSD, a subsidiary of the Stock Exchange, records share transactions and ownership electronically. In other words, it eliminates the need for shareholders to physically hold share certificates.
"To be honest with you, I suspect [the Government] is so strapped for cash that it could be that they may go after that source of income," fretted an investor. The concern is in relation to a section in the Income Tax Act which, essentially, says that if an investor's profit from the JSE (or selling property, for that matter) exceeds half of his or her primary source of income you must pay taxes on the excess.
In other words, if the investors trading activities are sufficiently 'lengthy' the person may be perceived to be a trader as opposed to being a passive investor. Conceivably, then, a pensioner who does frequent investments on the market could be viewed as a trader even though he or she isn't one.
According to the letter from the Depository - over the signature of the general manager, Marlene Street-Forrest - the requirement is "in keeping with international standards." The statement said the information is required by March 31, 2006 for clients' "accounts to remain active."
However, based on investigations by the Financial Gleaner there is no legal basis for the JCSD to force shareholders to provide their TRN; in fact, legally, only the government or its agencies can request a citizen's TRN number.
When this newspaper checked with a number of financial companies they said that there is no legal basis for their entities to require a TRN number with one company admitting that it still opened accounts if the client did not have a TRN number.
"I don't know that they have the authority to demand it. They certainly can withhold services unless you provide it. They have that discretion," a lawyer told this newspaper. According to the lawyer, "after the horse has gone through the gate - that is to say, after you hold shares and you are registered under the registry - for them to place that demand on you is unreasonable."
When contacted by the Financial Gleaner, Mrs. Street-Forrest defended the Depository's decision.
"The [JCSD] can, in its good wisdom, make decisions to improve the efficiency in its depository. Like banks, like any other institutions we look at relevant policies and in respect of these we decide what is necessary."
She acknowledged that there was no legal compulsion involved. "We are not saying right now that this is a requirement."
Mrs. Street-Forrest pointed out that the JCSD's action was not a result of any directive from a third party (say, tax authorities or regulatory agencies). But she said that "from time to time we are asked - and can be asked -- about any individual, say by the court, in respect to the [individual's] account."
