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The Asset tax  (ad valorem), which came in effect in 2013 was supposed to be a temporary measure, no longer than three years and would help the Government out of a tight revenue spot. 

It was a promise made but never kept and the Jamaican Government continues to milk local financial institutions with it at the expense of the well-being of those in the sector.

This 0.25 per cent tax was imposed and in 2021 was reduced to 0.125 per cent on the taxable value of assets for: 

• Deposit-taking institutions
• Securities dealers
• Life insurance companies
• Property and casualty insurance companies 

This has proven to be a pernicious tax that continues to weigh on financial institutions, a yokel with no clear date as to its removal. The Andrew Holness-led JLP administration is seen as sympathetic and a friend to the business sector and should move with alacrity and expeditiously to make this less of a burden on Jamaican finance houses.

Right now it looks like it is smiling while sticking the knife in.

The Bank of Jamaica has said that it continues to send the signal that financial institutions can begin reducing lending rates but is blithely ignored. This is not because the sector is heartless and rapacious for money but because it has to contend with this asset tax which is a burden on capital, inhibits the reduction of lending rates and comes as yet another tax on top of high corporate income tax for regulated entities.

It has been said that the impact of Hurricane Melissa will cost the country 41 per cent of GDP. For decades, tourism and remittances have been major engines of the economy, but in this new world order these two pillars are coming under threat.

Jamaica will have to depend on greater productivity with more businesses being encouraged and funded. There will now be a greater reliance on financial institutions to help resuscitate the economy. If they feel they were duped before with the asset tax, they will be reluctant to take the government at its word in the future opting to put its interests first.

Addressing the vexing issue of the asset tax earlier this week in Parliament, the Minister of Finance Fayval Williams, said: “ There is a commitment to roll back the asset tax however, we have just come out of a Category 5 hurricane that has devastated the country but our commitment remains that as soon as the budget allows, we will begin rolling back.”

While the sentiment is commendable, don’t hold your breath and expect a significant change on the asset tax anytime soon.

One is reminded of that Ned Stark line in Game of Thrones, “ Everything before the word but is horsehit!”

This is Jamaica; there will always be one crisis following another. Observing current climatic episodes, who is to say there will not be another major hurricane later this year or next year? What will be the impact on Jamaica of another global financial crisis or elevated inflation in the United  States?

Minister Williams needs all the revenues she can to finance that $1.4 trillion budget but must also be focused on growing the economy and not debilitating the financial sector. She has to be more affirmative on the removal of the asset tax and give clear timelines, thus allowing the sector to plan. As it stands the financial sector is a lifeboat in the middle of the ocean, expecting to be rescued but has no idea when. 

Last October the Group CEO of the JMMB  Group, Keith Duncan, who is now a Government Senato,r painted a picture of the impact of the asset tax on his business. In relation to JMMB, he said: “ So when we’re passing this asset tax which is a distortionary tax, it is not fair to shareholders, it depletes the capital of the financial institution and it provides a floor on what we can lend because it is a cost to the business so we are calling on the Government of Jamaica once again to  take a look at this.”

JMMB has paid over $9 billion in asset taxes since it was imposed. Finance companies more often than not have to pay the asset tax in the first quarter of their financial year. 

The pestilent nature of this asset tax and the damage it brings can be seen in the case of NCB.  At the end of last year, so many people surmised the end of Michael Lee Chin, inclined to believe he would not come up with the US$94 million to satisfy AIC bondholders. The doubting Thomases were gleeful but he did come up with it and honoured his obligation, allowing him to turn his full attention on strengthening NCB and seeing to it that its share price climbs close to the level it was before the COVID pandemic.

Without the albatross of the asset tax, more dividends would allow him to get out of the pickle or better address it. 

Michael Lee Chin succinctly conveyed what the asset tax had wrought on both NCB and himself personally, and attention should be paid to what he said at yesterday’s AGM at the Jamaica Pegasus Hotel in Kingston. 

“The big elephant in the room is the asset tax. In 2012, the asset tax was brought on as a temporary measure. When I saw that, it reminded me of the case of Canada imposing taxes in 1919 as a temporary measure to fund World War I.

“In Jamaica’s case, the asset tax was brought on as a temporary measure for three years. It is still here through both JLP and PNP administrations. So what does that mean to us as shareholders? NCB has paid US$194 million in asset tax since 2012. This sum did not go to shareholders. What does this mean in terms of each shareholder? Last year, NCB’s asset tax was over $2.6 billion. We have 2.5 billion shares outstanding so it works out to be $1.05 per share. So every shareholder paid $1.05 in asset tax per share.

So what does that mean? Last year we paid three dividends of 50 cents each. We missed a dividend payment in the first quarter. Why did we miss that dividend payment? Because we had to pay over $2.6 in asset tax, that’s why we missed the dividend,” said the Chairman of NCBFG.

One can clearly see why NCB had to manage this impact. At the AGM, former NCB executive Mr. Theodore Golding expressed his disgruntlement at not receiving more dividends and said that people like him depend on his NCB dividend to live on. He was most upset. The Board listened diligently and let Mr Golding get his rancour off his chest, but there can be little doubt that the asset tax forced NCB to recalibrate and get itself on a more certain footing. Temporary pain to suffer for more long term benefits. A year from now, shareholders will be at the AGM with Cheshire Cat grins all over their faces.

Chairman Michael Lee Chin continued: “ Last year, we paid $1.50 in dividends. Now, if we didn’t have an asset tax, what would it have been? It would have been $2.55. Now, what does that mean in terms of a pay cut? It means a 41 per cent pay cut. Would you like to take a 41 per cent cut in salary? That’s what NCB shareholders took last year, so let’s call a spade a spade. Anything that affects shareholder value, we have to talk about it. This has to be resolved.

“That pensioner who bought NCB shares for the income took a 41 per cent hit in income last year. Now, on the other extreme, the controlling shareholder (who you may not have any empathy for but is still a nice guy) took a 52 per cent cut. What is 52 per cent of US$194 million? Exactly US$100 million. That’s what AIC did not get over the last 12 years.”

Michael Lee Chin did not shy away from his predicament last year and how many was waiting for the hammer to fall, nor did he use the moment to pat himself on the back. Instead, he painted a picture of the deleterious impact of the asset tax and how ruinous it can be.

“Now the most advertised number in Jamaica is US$94 million. That is the sum AIC had to come up with on December 31, 2025. You can see the effect of the asset tax,” he told the packed AGM.