Shaw Knocks Transfer Pricing Bill As Disincentive To Foreign Investors
its tax bulletins, the legislation will apply to transactions even between unconnected parties if the non-Jamaican party is in a tax haven.
In addition, it will take into account the use of captive insurance companies, that is, insurance companies established by a parent group or groups with the specific objective of covering the risks to which the parent is exposed.
Shaw charges that the bill, as proposed, breaks from international conventions and “opens the door to a heavy hand from tax administrators”.
Shaw’s propositions
He proposes that the rules for advance-pricing agreements – APAs – should be clearly set out before the implementation of the new transfer-pricing regime, must be approved by Parliament, and once passed, businesses should be allowed a grace period of a year to become familiar with the APA rules before they take effect.
He is also pushing for the APA regulations to be developed before the transfer-pricing bill itself is passed.
“To consider one without the other would be premature in the extreme,” Shaw said.
Phillips has said the law won’t take effect until the regulations have passed. He warned, however, that there would be no delay in implementing the law.
Jamaica’s last commitment for passage of the legislation under its IMF-backed economic programme is October 2015.
The finance spokesman also proposed that, with the passage of the transfer-pricing law, year-old legislation that polices input GCT credit where a service importer receives imported services from a connected person, should be repealed.
The Provisional Collection of Tax (General Consumption Tax) (No. 5) Order 2014 allows the tax commissioner to deny the credits if a business cannot show that “the consideration payable by the service importer to the connected person for the imported services does not exceed the market value for those services; and the connected person has the capacity to supply the imported services to the service importer”.
Shaw argued that the application of both sets of legislation would be burdensome for international businesses operating in Jamaica.
He also knocked the penalties included in the transfer-pricing bill as excessive, and said the language was unclear as to whether they would apply to individuals and who would be liable for imprisonment.
The legislation proposes fines of up to $2 million or imprisonment up to a year.
To introduce the legislation in its present form, Shaw concluded, would be “a recipe for confusion, prosecution of innocent parties, inefficient tax administration and costly litigation, which the Government cannot afford”.
