Government defends profit sharing scheme within bauxite sector

KINGSTON, Jamaica, Mar 1, CMC – The Jamaica government says it has no plans to abandon the bauxite levy and will instead engage in a profit share regime with mining companies as it seeks to rebuild the bauxite sector.
Finance Minister Audley Shaw, speaking during a meeting of the Standing Finance Committee in Parliament on Tuesday said the levy has been put in hold.
He told legislators that in the case of JISCO (iuquan Iron & Steel Company Limited), it’s five years and in the case of Rusal, it is less than that.
“But there is not a straight line thing in it because in the respect of Ewarton for instance, you have a lot of aged equipment there that needs capital improvement, and of course, in the case of Alpart, you recognise the significant sums of money that have to be expended there.
“So we think that the period of relief on the levy is justifiable in order to get it going and to get it up and running as a permanent fixture in rebuilding the sector,” he said.
But, Phillip Paulwell, the Opposition spokesman on Mining, said the opposition is concerned that the government is not charging a tax on companies which mine bauxite here and is urging the Andrew Holness government to re-think the policy.
“It is the only real source of revenue that we’re getting from an industry that depletes our resources. It is the only benefit that the country will receive in terms of direct taxation. We believe that the timing is bad because the industry is on the upsurge – that is with lower oil prices (and) with the price of alumina moving upwards, now is not the time to abandon the levy,”Paulwell said.
“It is a time to try and reap some of the losses that we have experienced over the last 10 years,” he said, noting that the profit share agreement will not work because it is difficult for governments to monitor and ensure companies make a profit from which to collect any significant revenue.
 “That’s the reason why we believe the levy is the surest way of enabling revenues. It is a most efficient taxation providing GCT (General Consumption Tax). Going to a profit sharing regime is not going to enable you to receive any revenue,”Paulwell said.
Last October, the government announced that it was entering into a profit-sharing scheme with US-based aluminium company New Day Holding, forgoing the usual bauxite levy arrangement.
Under the agreement, the government is expected to earn 17.33 per cent of earnings before interest, taxes, depreciation and amortisation or “US $1.50 per shipped dry metric tonne of bauxite whichever is the greater”.
“The model being employed with New Day Holding seeks to give the Government of Jamaica share of the profit in not simply the bauxite mines in St Ann but a similar 17.33 per cent of the profit of the more profitable aluminium plant at Gramercy in Louisiana, in the United States,” Transport and Mining Minister Mike Henry said then.
He said New Day is committed to spending in excess of US $35 million between 2017 and 2021 to improve its Jamaican assets.