By RASHAD ROLLE
Tribune Staff Reporter
THE government is projected to lose $7m in revenue annually through its Over-the-Hill tax exemption policy, Financial Secretary Marlon Johnson revealed yesterday.
Officials, nonetheless, stress the benefits of the programme far outweigh a small revenue loss for a country that generates more than $2bn each year.
Under the programme, residents and businesses making less than $5m per year will be exempt from real property taxes, customs duties on materials necessary for constructing, equipping and completing buildings, excise taxes and stamp duty.
Alcohol and gaming businesses are excluded from the tax benefits.
The bulk of revenue loss will be the result of real property tax exemptions. Yesterday, Dr Nicola Virgill Rolle, director of the Economic Development and Planning Unit in the Office of the Prime Minister, said $6.2 million in real property taxes were collected in 2017 from the area that will be designated an economic empowerment zone beginning July.
During a press conference, Dr Rolle emphasised that rigorous monitoring mechanisms will accompany the programme to prevent leakages and fraud; these include an electronic card system that will limit and track the amount of custom duty exemptions a person or business accesses.
“We’re working with the Ministry of Finance to make sure the exemptions are reasonable,” she said, noting customs duties exemptions are not infinite under the programme. “For example, if you wanted to do an improvement to your home we can pay for the material to construct, dealing with construction or things to equip your business; you’re going to detail your project to the (Department of Inland Revenue) who are then going to work with quantity surveyors to say what is a reasonable amount of money that is going to be expected to do such and such a project and then that will be the amount loaded onto your card for the exemptions to be granted and so it’s all about being reasonable in the approach so we’re not seeing leakages.”
Critics of the programme say it will cause gentrification. A concern is that rental costs will increase as the area becomes more attractive to outsiders and as landowners use the benefits of the programme to refurbish their units.
Dr Rolle, however, revealed the government will build affordable housing units in the area to mitigate such possibilities. Officials also hope landowners, themselves beneficiaries of tax exemptions under the programme, keep rates at affordable levels.
Dr Rolle said: “What we have seen as best in practice for empowerment zones and for communities concerned with issues of gentrification in that way is to always ensure that you promote affordable, decent housing. As we go through our clean up exercises, for example, we are looking to identify tracts of land for affordable housing options. We know we have to upgrade the housing stock anyway to ensure people have decent housing. There must always be a good stock of affordable housing available.”
Dr Rolle said it would take up to three years to mobilise and begin constructing the new affordable housing units.
She said the programme will be monitored and, if necessary, stopgaps will be put in place to prevent unintended consequences like new businesses moving into the area for its benefits and, in so doing, make the environment more challenging for existing businesses.
“It’s very important as the trade certificates are issued to pay attention to trends and to see if that will occur,” she said. “We have built in a process whereby to benefit from the exemptions, it’s not just a blanket, you’re in the zone so you benefit. There is a process that you apply to the Ministry of Finance for the trade certificate which then allows you to benefit from the benefits which will then give us lots of information about whether we’re seeing new changes happening in that so we can monitor trends so we could build in stopgaps.”
In addition to the programme’s economic empowerment component, focus will also be placed on equipping public institutions with smart technology and providing greater access to “broadband, community centres, libraries, health clinics, parks and other recreational facilitates,” among other things.
To accomplish the programme’s goals, $5 million will be budgeted for it annually. Dr Rolle, however, stressed that the goals of the programme also will be accomplished through individual ministries and departments and the annual budget they receive.