“T&T ranks the best among Caribbean counties for business taxes. Jamaica not so good, since GCT (sales tax) is included” is the story heading of a Facebook post from a Caibjournal.com article compiled from a World Bank report.
The problem is that one has to be careful in making definitive statements as the comparisons may not be correct. First off, one would need to look at the overall tax situation in each country to get a better picture. In Jamaica, a large part of the tourism sector is free from corporate taxes or because of large capital allowances, pays less. Most of the agricultural sector pays no corporation taxes at all. Data in Jamaica also shows that approximately 70-80 percent of taxes are paid mostly by the Jamaica Stock Exchange listed companies. Hence, it is difficult to come to the conclusion that Jamaican companies pay as much taxes as the article suggests.
The reality is that after corporate taxes of 33⅓ percent on profits after capital allowances, payroll taxes are next in size. Other taxes are very small and would make no meaningful impact on the total tax collected apart from financial entities and a few others who can’t recover the full impact of GCT.
Since GCT is not direct a tax on the majority of corporations, this leaves payroll taxes that corporations are required to make a contribution. Even then, only the portion that the company absorbs is the true cost since payroll taxes are deducted from income before corporate taxes. It is difficult to see how the nominal tax rate of 33⅓ percent could hit 44.3% in Jamaica. Additionally, since 2013, some corporations pay 25 percent and some 30 percent.
The CaribJournal.com stated that “The World Bank defines the total tax rate as the “amount of taxes and mandatory contributions payable by businesses after accounting for allowable deductions and exemptions as a share of commercial profits. Taxes withheld, such as personal income tax, or taxes collected and remitted to tax authorities like VAT or sales tax, were excluded in the data”.
Jamaica may end being the country with the highest effective tax rate for some corporations but more details are needed to make this conclusion.
If the data on the various countries is close to reality, then there is a huge difference between Jamaica and Trinidad of 50 percent. If true, it explains why Jamaica finds it difficult to compete with Trinidad.
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