Minister of Finance Dr Omar Davies has not held to his decision to refund withholding tax on pension fund investments within 45 days. - File

Ashford W. Meikle, Business Reporter

The cash-strapped Ministry of Finance, whose fiscal numbers are already off-target by $7 billion, has instructed the director general of tax administration Vinnette Keene, to cease refunding the payment of withholding taxes on investments to pension funds, Wednesday Business has learned.

"We have had problems recently, for the past two, three months. When we call we are told that they got directives from the Ministry of Finance," said a source.

"I suspect that the Ministry of Finance is trying to curtail expenses for the rest of this fiscal year to ensure that the fiscal numbers don't come out looking bad, but no one knows when they will start sending the refund cheques."

Ingrid Chambers, managing director of the country's largest provider of segregated funds, NCB Insurance Company, has also confirmed that since October or November there has been a cessation of refund cheques.

"We were getting the refunds and we were much happier but since then they have stopped," she said last week.

"We do constant follow-ups, but our approach is not antagonistic."

NCB Insurance is owed about $794 million. It is estimated that government has about $2 billion in withholding taxes or approximately two per cent of the value of pension funds under management outstanding for the industry.

"We are just about to write to the minister because we haven't seen any consistent improvement in the matter since we first brought this to the attention of the minister two years ago," chairman of the Pension Fund Association of Jamaica (PFAJ), Allan Lewis, told Wednesday Business yesterday.

Dissatisfaction

The association has actively lobbied the Finance Minister Dr. Omar Davies, expressing its dissatisfaction with government's treatment of the refunds.

Currently, pension fund managers are required to deduct withholding tax from interest earned on taxable instruments, a policy Davies introduced in 1999.

But, even though a fast-track window was established to facilitate refunds within 45 days, this has not happened and in some cases refunds are several years behind.

The PFAJ has argued in the past that the inability of the pension funds to invest the amount being withheld on which the government does not pay interest affects the investment income of the funds, reducing potential benefits.

"The main issue is that it impacts on returns to members. It also has an impact on the administration because of the time and effort that has to be spent following up with the Ministry of Finance and it is just a time-consuming matter for something that shouldn't be an issue," said Lewis.

ashford.meikle@gleanerjm.com