‘Unfair and archaic’ - JPS bemoans ‘unequal tax laws’ as several high-volume customers unplug from the company’s grid
Published:Sunday | March 8, 2020 | 12:34 AMCorey Robinson - Senior Staff Reporter
The Jamaica Public Service (JPS) is clamouring for a massive reduction in its corporate income tax (CIT) rate after at least a dozen high-volume consumers have either disconnected fully or partially from the company’s grid since 2018.
The utility giant is asking the Government for an immediate reduction of its CIT rate, from 331/3 per cent to 25 per cent, while it fights to retain another dozen high-volume customers threatening to discontinue its electrical supply.
Among those who have already opted off the power grid are The University of the West Indies (UWI), Red Stripe, and a string of hotels and other manufacturing plants, who are now using various alternative power supplies. JPS believes several others are on the verge of cutting ties.
Vernon Douglas, chief financial officer at JPS, said that each of these organisations is equivalent to at least 15,000 households, noting that their absence will ultimately decrease revenue to the power supply company, while driving up the cost of electricity.
If granted, the CIT cut will translate to a 25 per cent reduction in taxes paid. According to JPS’s Consolidated Statement of Comprehensive Income, up to December last year, the company paid US$7.87 million in taxes out of net profits of US$36 million. This was an effective tax rate of nearly 22 per cent.
“Normal companies pay 25 per cent, while JPS pays 331/3 per cent, being fully regulated,” Douglas shared with The Sunday Gleaner.
The inequity, he said, stems from unfair tax policies that put pressure on JPS, banks, and telecommunication companies operating locally.
Self-generating
“It was primarily justifiable then, years ago, on the basis that these entities had the same playing fields in terms of their competitors, and that they had a barrier to entry into their markets; that was the same thinking for JPS. But that’s not the case. Our customers, with the onset of technology, particularly distributive energy technology – and primarily our large customers – can now opt to self-generate,” said Douglas, explaining that Wisynco and Red Stripe, for example, who generate their own electricity, now become JPS competitors.
He said that JPS should be better placed as a catalyst for national development by the Government. Such is the case of other power companies and governments in the Caribbean, he argued.
Last Friday, Red Stripe explained that its combined heat and power (CHP) plant was commissioned in 2013. The company has now bolstered environment and energy safety benefits in excess of 80 per cent at the plant.
“By recovering and using heat typically wasted by the conventional production of electricity, the CHP offers considerable environmental benefits when compared with purchased energy. The CHP requires less fuel,” explained Dianne Ashton-Smith, head of corporate relations at Red Stripe.
“We are leading by example and using this technology to help reduce our carbon emissions and improve operating efficiency, which is much higher than the efficiency of conventional production of electricity.”
UWI incorporated its Pelican Power Limited in 2018, with GK Investments taking a 50 per cent stake in the venture.
The seven-megawatt plant, fired by liquefied gas or liquid petroleum, was built at a cost of US$10 million. Savings from it is projected at J$300 million annually.
Declining to speak directly to JPS’s claim, Dionnie A. Headley, managing director of Sygnus Tax Advisory, explained that companies regulated by the Financial Services Commission, the Bank of Jamaica, and the Office of the Utilities Regulation are at a severe disadvantage to other entities.
“They (regulated companies) have a higher tax rate. For instance, there is the employment tax credit incentive that they are unable to use like everybody else, and whereas last year when the Government removed the asset tax for all other companies, regulated companies are still subject to asset tax,” she said.