JAMAICA: Share prices plunge following imposition of new tax
KINGSTON, Nov 25 (IPS) - Following the announcement of a 23 percent tax to be levied on bank profits, banking sector share prices have plunged on the stock exchange.
The exchange index declined by 309 points Thursday, one of the biggest falls in the market for any day this year. The decline in bank stocks was responsible for more than 90 percent of this slump.
According to Bankers Association President, Rex James, the fall in bank share prices was a direct result of the imposition of the new tax.
"The value of bank stocks has been depreciated by government taking profits due to investors," James says.
Finance Minister, Omar Davies announced Wednesday night that the new tax would be based on net bank profits earned in the first half of this year and to be collected on December 15.
"Shareholders throughout the entire business community are affected by the new tax," says Canadian Imperial Bank of Commerce (CIBC) Jamaica Limited managing director, Al Webb.
"The new taxes are discriminatory and punitive," says James. It is "immoral, inequitable and unjust," he added.
He says in the past banks have cooperated extensively with government in carrying out its monetary policy and now they are being punished for doing well.
But Davies says the surcharge is equitable. The productive sector, he says, in spite of its growth does not make as much profits as the financial sector which made more profit during the first six months of 1994 than for the entire 1993.
He says the levy was imposed on the financial institutions to finance the gap which has resulted from wage settlements in the public sector.
The government hopes to earn some 15 million dollars from this new tax.
"The bank tax is a lazy man tax. It is the easy way out no matter what the consequences to the rest of the economy. The government has balanced its books and to hell with the rest of the economy," says Basil Buck, financial analyst.
Buck says the tax will put a further nail in the coffin of an already prostrate stock market. Twenty eight percent of the 45 listed stocks are banks.
© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service