‘Anti-business law’
Samuda blasts Gov’t for transfer pricing policy
Opposition spokesman on industry and commerce Karl Samuda addressing the transfer pricing policy in Parliament on Tuesday.
KARL Samuda has described the transfer pricing regime, as well as the Government’s push to implement it retroactively, as unfriendly to business, and has predicted that the legislation will open up the Administration to hundreds of lawsuits based on interpretation.
“This an anti-business law… it will have a deleterious effect on business,” Samuda, the Opposition spokesman on industry and commerce, told the Jamaica Observer on Wednesday evening. “It is a very dangerous practice they are embarking on; Jamaica can least afford this.”
Samuda was responding a day after the Government used its majority in the House of Representatives to approve the back tax provisions included in new transfer pricing regulations, despite the Opposition’s objections that the measure would strangle businesses and obstruct investments.
The 21 Government members (excluding Speaker Michael Peart) who were present voted in favour of two resolutions accommodating the introduction of transfer financing — which is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. The 14 Opposition MPs voted against it after Opposition spokesman on finance Audley Shaw called for a “divide”.
The vote favoured two resolutions: the Income Tax (transfer pricing agreement) Rules, 2015; and the Income Tax (transfer pricing documentation) Regulations, 2015.
Shaw and Samuda had urged Finance Minister Dr Peter Phillips to remove the offending provision from the Bill, which requires that the affected companies pay the tax dated back to January 1, 2015.
The Private Sector Organisation of Jamaica has also raised objections to the retroactivity.
However, on Tuesday, Dr Phillips insisted that the policy is not a retroactive application of the taxes.
“All the reports of assessment for 2015 are due no later than March 2016, and this is no less. What is the difference is that we are giving the assurance that in this transitional period, no prosecutions will be undertaken and that is to emphasise the collaborative approach that is being taken,” Phillips argued.
But on Wednesday, Samuda scolded Phillips for his position on the controversial issue.
“Peter Phillips has displayed a wretched stubbornness by refusing to accept the recommendation to not make this legislation retroactive,” Samuda said.
“There is no provision for retroactive taxation, and to suggest this is not retroactive taxation is an attempt to mislead the country,” he added.
Samuda also took issue with the powers of the tax commissioner under the legislation, arguing that they run the risk of leaving businesses exposed.
According to Samuda, if the commissioner interprets compliance as being outside of the agreement, the tax department can terminate the agreement, and during that period the business is left exposed.
“So you are then left to their mercy, because then they have the right to root up your business… and you have no protection by way of a written agreement,” he added.
“The basis of the question on which the termination comes about needs greater explanation, and it’s for this and other reasons why the mad rush to have it done now, with the provisions that it has, is totally unreasonable,” Samuda argued further.
“I really don’t see the need for the legislation, because it is already improper for anyone to falsify [declarations], for instance over-invoicing or under-invoicing. That law exists now. The Customs can investigate and find out whether a person is under-invoicing, double-invoicing, over-invoicing, so in principle I don’t see the mad rush to this piece of legislation,” he said.
Pointing to the penalties outlined in the Act, Samuda said the retroactive legislation is unconstitutional because it carries a criminal sanction.
He also described the legislation as “entrapment” and accused the Government of “overreaching” to get into the nerve centre of businesses.
Prices, Samuda said, are not easily predetermined, and as such businesses must be free to shift their strategy, and pricing formula must be flexible.
“The heart and soul of any business enterprise is to ensure that it protects its trading strategy,” he said. “This is not the time for the introduction of legislation to curtail businesses.”
He also said he supports Shaw’s declaration in the House on Tuesday that the JLP will repeal the legislation if it is elected to office.
