Sabrina N. Gordon, Business Reporter

Audley Shaw (right), Minister of Finance and the Public Service, converses with George Cumming (left), executive director of Century 21 Heave-Ho Properties, and Wilton Mayne, at the Century 21 real-estate training seminar at the Hilton Kingston hotel on Tuesday. - Rudolph Brown/Chief Photographer

Finance Minister Audley Shaw, in his first public speech since assuming office on Tuesday, announced the abolition of transfer taxes and the reduction of stamp duties, saying the moves should speed up the pace of business in construction and related industries.

"We have to create a mechanism that will serve as a stimulant to the real estate industry," said Shaw.

The real estate sector's reaction was swift, heralding the announce-ment as "great news" in a statement that followed the finance minister's speech at a training seminar hosted by Century 21.

Economist Dr. Damien King also said it was likely to have a positive impact, but noted that the real effect would not be felt outside of a more broad-based approach to tax reform.

"Changes to the tax system require a comprehensive approach to reflect the inequity and arbitrariness that is present in it," he told Wednesday Business. "Until a broad-based approach to reform is taken, then no noticeable positive effect will result."

Stimulant to the market

Errol Gregory, another economist, said Shaw's new direction will likely act as a stimulant to the housing market, the construction industry and the creation of wealth.

The action does not go as far as the Matalon Tax Committee had proposed, but the Real Estate Reform Consortium, comprising some of the top names in construction, says it would help stimulate investment in the property market.

"This is great news," said consortium chair, Lorna Phillips. "The abolition of transfer tax and a reduction in stamp duty will go far, in our view, towards stimulating the sector and making Jamaica a more attractive proposition for investors at home and abroad."

The Matalon Committee in its 2004 review, commissioned by former finance minister Dr. Omar Davies, had proposed a total elimination of stamp duty, excluding postage on mail, and the reduction of transfer tax on real-estate transactions from 7.5 per cent to 5.0 per cent, as well as its elimination and/or reduction on other types of transactions.

Shaw warns that the taxes will not disappear immediately, but said their phased withdrawal would begin in the short term. He refused to elaborate further on the programme, saying he did not want to pre-empt Cabinet considerations, making it impossible to estimate the likely financial impact.

The government is projecting collections of $10.7 billion in stamp duty this fiscal year, as estimated by Shaw's predecessor, up from $9.9 billion in 2006/07.