Dear Editor,
The Bustamante Industrial Trade Union (BITU) is once again urging the Government to amend legislation concerning the rate of interest workers in the financial sector pay on concessionary loans, which is legislated as a fringe benefit to them, and also increase the current threshold on such loans.
The union recalls that in 1991 a tax was placed on these loans by the Ministry of Finance and Planning as a revenue-earning measure to assist the Government in financing the budget that year. The legislated interest rates and amounts have not been revised in the 22 years of its existence, and have
now unfairly become a burden on the deserving workers in this sector.
As the trade union which primarily represents workers in the financial sector -- including employees
of the Bank of Jamaica, merchant, commercial, and development banks, insur-ance companies, credit unions, building societies, and trust companies -- we have been seeking the support of the ministry in reviewing these provisions for several years without success. We believe that in light of the current economic situation, and the effect it has been having on these workers, that some attention must be paid to the issue, immediately.
The fact is that employees in most local financial institutions are designated beneficiaries of concessionary loan rates, but are obliged to pay tax on the difference in interest payment between a concessionary rate and a prescribed open market rate.
The difference between the concessionary rates granted by a financial institution and the open market rate represents a cost saving to the borrower, and this was declared by the ministry as income, under Income Tax law, and as such has attracted a tax of 25 per cent on interest saved on loans that exceed a threshold of $1.5 million. Loans of up to $1.5 million were, however, exempted from this tax. But with these provisions unchanged over the past 22 years, the concessionary nature of these loans has been severely reduced and serving to disenfranchise these workers.
The BITU, in the meantime, has been seeking to draw the attention of the Ministry of Finance and Planning to the disadvantages which have been created by its failure to review these provisions, because we do not think that it is fair that a fringe benefit granted by employers to employees, as part of their compensation package, should be reduced to a disincentive because of the Government's insistence of disregarding the intent of the provision of the relevant legislation.
The BITU is again seeking the cooperation of the ministry in revising the provisions of this imposition, in keeping with current concessionary loans trends, as well as current general market trends.
We are asking that the Ministry of Finance and Planning revise the open market rate prescribed in the provision from 14 per cent, and anticipate that the applied interest rates will be no less favourable that the percentages reflected in the recently signed Heads of Agreement for Public
Sector Workers.
We are also proposing a revision of the exemption threshold from the limit of $1.5 million to an amount reflective of current costs associated with the stipulated purposes, as these loans are only applicable to: purchasing house for owner's occupancy; purchasing a motor vehicle for
private use; purchase of land; education; emergency
needs (compassionate loans); training; and furnishing of residence for owner's occupancy.
We are urging the ministry to give immediate attention to this prolonged issue, as it has become a matter of great disaffection among workers in these institutions, especially in the current economic climate and environment of austerity.
Kavan A Gayle, OD
President General
Bustamante Industrial Trade Union
Review concessionary loans tax for workers
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The Bustamante Industrial Trade Union (BITU) is once again urging the Government to amend legislation concerning the rate of interest workers in the financial sector pay on concessionary loans, which is legislated as a fringe benefit to them, and also increase the current threshold on such loans.
The union recalls that in 1991 a tax was placed on these loans by the Ministry of Finance and Planning as a revenue-earning measure to assist the Government in financing the budget that year. The legislated interest rates and amounts have not been revised in the 22 years of its existence, and have
now unfairly become a burden on the deserving workers in this sector.
As the trade union which primarily represents workers in the financial sector -- including employees
of the Bank of Jamaica, merchant, commercial, and development banks, insur-ance companies, credit unions, building societies, and trust companies -- we have been seeking the support of the ministry in reviewing these provisions for several years without success. We believe that in light of the current economic situation, and the effect it has been having on these workers, that some attention must be paid to the issue, immediately.
The fact is that employees in most local financial institutions are designated beneficiaries of concessionary loan rates, but are obliged to pay tax on the difference in interest payment between a concessionary rate and a prescribed open market rate.
The difference between the concessionary rates granted by a financial institution and the open market rate represents a cost saving to the borrower, and this was declared by the ministry as income, under Income Tax law, and as such has attracted a tax of 25 per cent on interest saved on loans that exceed a threshold of $1.5 million. Loans of up to $1.5 million were, however, exempted from this tax. But with these provisions unchanged over the past 22 years, the concessionary nature of these loans has been severely reduced and serving to disenfranchise these workers.
The BITU, in the meantime, has been seeking to draw the attention of the Ministry of Finance and Planning to the disadvantages which have been created by its failure to review these provisions, because we do not think that it is fair that a fringe benefit granted by employers to employees, as part of their compensation package, should be reduced to a disincentive because of the Government's insistence of disregarding the intent of the provision of the relevant legislation.
The BITU is again seeking the cooperation of the ministry in revising the provisions of this imposition, in keeping with current concessionary loans trends, as well as current general market trends.
We are asking that the Ministry of Finance and Planning revise the open market rate prescribed in the provision from 14 per cent, and anticipate that the applied interest rates will be no less favourable that the percentages reflected in the recently signed Heads of Agreement for Public
Sector Workers.
We are also proposing a revision of the exemption threshold from the limit of $1.5 million to an amount reflective of current costs associated with the stipulated purposes, as these loans are only applicable to: purchasing house for owner's occupancy; purchasing a motor vehicle for
private use; purchase of land; education; emergency
needs (compassionate loans); training; and furnishing of residence for owner's occupancy.
We are urging the ministry to give immediate attention to this prolonged issue, as it has become a matter of great disaffection among workers in these institutions, especially in the current economic climate and environment of austerity.
Kavan A Gayle, OD
President General
Bustamante Industrial Trade Union
Review concessionary loans tax for workers
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