Left: Nathlee Dixon working on one of her designs. Right: A model shows off designs from Donovan Summers' Heather Laine Limited. - file

A sizeable chunk of tax phobic fashionistas and apparel firms, are operating underground, according to Donovan Summers, chairman of the Jamaica Fashion and Apparel Cluster (JFAC), denying themselves access to credit and technical assistance.

Indeed, Summers notes that out of Jamaica's declining economic fortunes has risen new demand for local fashion as imports fall off, but few companies have the capital - and are unable to access funds because of their informal nature - to leverage business from the new and expanding markets.

In hiding

He is not sure just how many designers and apparel firms are in hiding from tax collectors - no data is available - but Summers says his group assumes it is equivalent to the broader small business sector where non-compliance is running at about 80 per cent.

In other words, only a fifth or about 20 per cent pay their taxes.

"We in the fashion cluster have 122 members and that could be a small percentage of everyone, including dressmakers and tailors and others. You could be looking at hundreds," he said.

The Jamaica Business Development Centre, for example, has a credit line where fashion firms can access up to $3 million, but the funds are just sitting there with few able to qualify for loans, Summers said.

The fashion cluster formulated under the state-sponsored company competitiveness progamme is made up of Jamaican MSMEs in high fashion, uniforms, and accessories. Summers himself runs Heather Laine Limited, a company that produces casual and resort wear mostly for the Jamaican market.

Cannot afford taxes

Even some of the cluster members are not paying their taxes.

For them and the hundreds of others outside the cluster who are not, it's not that they don't want to pay the tax, Summers said, but fear they cannot afford it.

"They feel forced to operate underground for fear of back-tax obligations. To become compliant, one needs to file seven years of all statutory deductions including NHT, NIS and income tax, among others. It is an extremely onerous and costly process."

An exception is Nathlee Dixon who, since leaving high school 12 years ago, has been creating customised outfits and in 2006 registered Dixon's Creation, starting operations with a $250,000 grant from Churches Cooperative Credit Union's student/ entrepreneur programme.

Dixon believes in the benefits of going formal. Offspins, she said, included landing contracts from businesses that "are more likely" to outsource uniforms to a registered apparel firm.

"Most important is that you can become a part of the fashion and apparel cluster which allows you to network on a wider scale with other designers."

Not worth the effort

But, there are others like Marjorie Hardy, a 48-year-old from Waterford, St Catherine, who says she is not sure registration of her 'business' would be worth the effort in terms of covering overheads and paying taxes.

Although Hardy categorises crocheting as a 'hobby' she has been making sales steadily since age 18 when she sold the first one at a craft market.

"I actually started to crochet at 10 or 11. I make runners as well as hats and bathing suits," said Hardy.

She is not sure that there is a market big enough for her to hang out a shingle, although household runners still sell well.

Dixon says she has benefited from coming out of the closet with her fashion designing skills.

Seven months after stepping out independently into the fashion world, she was invited by Saint International - one of the island's leading modelling agencies - to showcase her designs on its annual Style Week extravaganza.

Hope of resolution

Today she has operational challenges, but there is hope of resolution. Dixon cannot, at present, increase the production volume and incorporate more of the creative design ideas, owing to the need for additional machinery, increased work space and money to hire suitably qualified personnel.

But, she is hoping for a European Union grant to upgrade her operations coming out of her membership in the fashion cluster, and for another injection of cash from the sale of a family property.

Summers meantime says he is considering training for members on why tax compliance is easier than they think, and what expenses they can claim back in order to tamp down on what they pay to the treasury.

But he wants help to bring about a change in the mindset.

"At some point the Government will have to get more aggressive in their attempt to include these people in the formal economy and provide them with support. This is a sector with deep potential to employ Jamaicans and we need that. We need these jobs."

Inducing compliance

According to Summers, the Government should be looking at inducing compliance by offering one year of tax forgiveness for every year that the apparel and fashion designer is compliant.

By the seventh year, he or she would, therefore, be fully compliant with all past delinquencies forgiven.

The chairman of the apparel and fashion cluster also notes that because they remain informal, many of those who work in fashion are unable to benefit from importing raw materials at best prices and from the best locations such as the Far East.

avia.ustanny@gleanerjm.com