Jamaican Government, BPO Sector to Fight Imposition of WTO Tax Proposal

A draft document has been floated in Jamaica’s parliament to impose a 10% tax on the country’s developing BPO industry, and that proposal is drawing a strong reaction …

Opposing the WTO tax proposal: Hon. Phillip Paulwell, Minister of Science, Technology, Energy & Mining, said: “We know that because of what exists now, we are at a competitive advantage over a number of countries, and we don’t want to lose that."

A draft document has been floated in Jamaica’s parliament to impose a 10% tax on the country’s developing BPO industry, and that proposal is drawing a strong reaction from both politicians and Jamaica’s BPO sector. Businesses operating in Jamaica’s free zones, such as the BPO-focused free zone in Montego Bay, are exempt from Jamaica’s corporate income tax, making the island nation an attractive destination for BPO work, especially contact centers. Jamaica, with its population of just under 3 million, is quick to point out its status as the third largest English native country in the Americas, behind the USA and Canada.

Apparently the government of Hon. Portia Simpson Miller, Jamaica’s Prime Minister, isn’t so keen on the idea of changing the rules of the game. “Our intention is to enable the current operators and future operators in this business to be unaffected by and large, with the regulatory framework that currently exists,” the Hon. Phillip Paulwell, Minister of Science, Technology, Energy & Mining told Nearshore Americas at last week’s 2015 Jamaica Investment Forum. “We know that because of what exists now, we are at a competitive advantage over a number of countries, and we don’t want to lose that. That’s why we have such strong advocates in the cabinet, and at the ministerial level, we are ensuring that this sector is preserved.”

The proposal seems to have germinated within Jamaica’s ongoing negotiations with the World Trade Organization (WTO), which wants to encourage “special economic zones” over the more traditional free zones. Jamaica argues that it needs the free zones to develop its knowledge and technology economy, and diversify away from reliance upon tourism and extractive industries such as aluminum ore mining.

Yoni Epstein, CEO of iTel BPO solutions, and President of Jamaica’s BPO industry advocacy group, the Business Process Industry Association of Jamaica
Yoni Epstein, CEO of iTel BPO solutions, and President of Jamaica’s BPO industry advocacy group, the Business Process Industry Association of Jamaica

“That is something that has been pushed by the World Trade Organization. In a free zone, you are forced to produce 85% of your goods for export and 15% for your domestic economy. That’s where the change developed from. When they talk about the special economic zones, they are not only looking at the BPO sector, they are looking at the logistics side of things, shipping, trans-shipment, dry docking facilities, manufacturing,” said Yoni Epstein, CEO of iTel BPO solutions, and President of Jamaica’s BPO industry advocacy group, the Business Process Industry Association of Jamaica. “What we have been advocating for is that the BPO sector for existing and new entrants is exempt from that, and as you have heard, we are well on our way to ensuring that is safe. The current government is very pro-BPO, they’re very pro-growth, they’re very pro-providing jobs, lessening the unemployment rate, and they truly understand and see that the BPO sector is a catalyst towards that actually happening, and bringing real growth back to our GDP in Jamaica.”

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Jamaica has experienced the birth and rapid growth of its BPO and contact center industry, led by early adopters Xerox and Vistaprint, both companies taking advantage of the free zone created in Montego Bay, a city across the island from the capital of Kingston, previously known only as a vacation resort destination. Now, BPO and contact center operators are opening centers throughout the country, such as in the capital of Kingston, and the interior city of Mandeville.

After entering and successfully complying with a voluntary restructuring agreement the Simpson Miller Administration entered into with the International Monetary Fund (IMF), the island nation’s economy seems to be rebounding solidly, with national debt, currency exchange rates, and public sector spending all under control, making Jamaica a safer bet for investors and multinational executives.

“They are proposing to actually start charging [BPOs] corporate income tax…although it would be lower than the regular income tax; the proposal is to start charging. They are really just in the discussion and exploration stages,” said Chad Gordon, ICT/Knowledge Services Manager for JAMPRO; Jamaica’s trade and investment promotion agency, in a conversation with Nearshore Americas. “Of course, our BPO sector is growing, so we don’t want to do anything to make it shrink!”

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