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Businesses await word on new urban tax incentives

Business interests advocating for the redevelopment of downtown Kingston and other urban centres say they are still awaiting word from the government on the promised redesign of the programme of tax incentives to encourage the renewal of blighted urban spaces

Prime Minister Andrew Holness and Finance Minister Nigel Clarke have said that the Jamaican government is re-examining the decades-old programme that commenced in 1995, with a view to addressing what have been identified as its weak points, to make it more attractive to businesses, as well as to broaden its scope.

“We believe that the Ministry of Finance is interested in modifying the incentives. For a while, I think the ministry was thinking about the dissolution of the incentives completely because the programme wasn’t having the kind of impact that the government thought it would; but its dissolution, we think, would be a retrograde step,” said Michael McMorris, convenor of the downtown Kingston redevelopment working group of the Jamaica Chamber of Commerce, JCC.

The JCC and the Jamaica Manufacturers and Exporters Association, JMEA, have been among the most vocal advocates of the tax relief programme designed to lure businesses back into rundown urban communities. The JCC is working with several other local stakeholders and international organisations in an attempt to develop a governance structure for a new round of development for the capital city’s downtown business district.

In his budget speech in Parliament in March this year, the prime minister lamented the slow take-up of the tax incentives by private developers.

“Under the Urban Renewal (Tax Relief) Act, the government has a very useful tax incentive programme which is administered by the Urban Development Corporation, UDC, where certain areas of Kingston and St Andrew are zoned for tax relief and other incentives. If private entities pursue developments within those special areas, they would be able to benefit from this incentive programme. Very few, if any, have applied for the relief,” Holness said.

Two years ago, the information from the UDC showed that over the 10 years to 2018, there were applications under the downtown Kingston programme for planned investments to the tune of $8.6 billion and four applications, totalling $8.1 billion worth of investments, under the facility for Spanish Town.

The prime minister conceded the shortcomings of the programme and promised changes.

“There is clearly a need for a more coordinated and strategic approach to stimulating and attracting private capital in areas in need of urban renewal. The government will be revisiting the zoned areas under the Tax Incentive Programme for Urban Renewal, with a view to including certain selected areas which are not now covered but aligned and in proximity to government’s capital expenditure to improve infrastructure. The requirements for the programme will be reviewed to reduce unnecessary bureaucracy, and the government will use its powers under the various legislation, where necessary, to acquire parcels of land for the purpose of renewing and developing communities of affordable housing in urban areas,” Holness added.

McMorris and other business leaders who spoke with the Financial Gleaner recently, said they have not been advised of the specifics of, or timetable for, the proposed changes to the incentive programme and await more information from the government. The JCC’s downtown Kingston working group is also said to be collaborating with the chamber’s economic and tax committee in proposing to the government, specific changes that the business lobby group wants to see made to the tax incentive legislation.

“The incentive programme as it stands now is not very easy to navigate. It is very arduous for developers. It does not provide any certainty about those incentives when you are at the beginning of the process. In terms if mitigating risks, which is what urban renewal incentives are supposed to do, I don’t know that the programme does a good job of that,” McMorris pointed out.

He added that the current programme caters only to large, sophisticated companies on the premise that that they will make a lot of money, have large tax obligations, and benefit from significant tax rebates after they have spent huge sums.

“I think it is necessary, and the preservation of it is necessary, but it needs to evolve into something that is simpler, more certain, and also speaks to businesses, whether they are small, medium or large. What you need is an ecosystem that takes everybody into consideration. It can’t be just big companies. It also has to be for young entrepreneurs, small businesses coming into the area and feeling that they can find a niche downtown. That’s what the incentives are supposed to do,” McMorris suggested.

The hotel developer noted that the incentive programme is also needed to stimulate the physical, economic and social revival of other urban areas in Jamaica, using Kingston as a model.

“All our urban centres are in dire straits. They are dysfunctional. They don’t work the way they are supposed to work. People should be able to come downtown and form businesses. Transportation should work. People should be able to live downtown, work there, and move through the area. And it’s not just Kingston – May Pen, Spanish Town, Old Harbour, etc. If you can get Kingston right, you can probably roll it out to the other areas, and incentives, I think, are an important a part of that,” according to McMorris.

The initiative was introduced for downtown Kingston in 1995, extended to Port Royal in 1996, Montego Bay in 2000, and activated for Spanish Town in 2008. The incentive programme for Spanish Town, which allowed tax write-off of more than 30 per cent for private developments, expired in March 2018 and was not renewed by the government. The legislation for Kingston was extended for several 10-year periods and is set to expire on January 19, 2025.

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