THE People's National Party has accused the Government of discrimination in its imposition of a tax on the preference-share dividends of foreign investors.

Mark Golding, opposition spokesman on industry and commerce, fumed at a June 19 order from the minister of finance and the public service, arguing that the decision was counterproductive to wooing foreign investment.

"Imposing a withholding tax on foreign investors while giving local investors tax-free status in relation to ordinary dividends discriminates against overseas investors and discourages the flow of foreign direct investment into Jamaica," Golding said Wednesday.

Finance Minister Audley Shaw, who was travelling, said he would review Golding's claim but questioned the timing of the Opposition's concerns.

However, Shaw noted that the tax on dividends was announced in the Budget Debate more than two months ago. The tax, the details of which are contained in the 2009/2010 revised revenue measure, is expected to yield $1.3 billion.

"The Opposition had no comment on it then, none whatsoever, so it is very strange that after several months Mr Golding is making this statement," Shaw told The Gleaner.

A surprise

However, Golding on Wednesday insisted that the tax would have come as a surprise to investors as there was no mention of this measure in Shaw's Budget presentations and no stakeholder consultation on the matter.

The tax on dividend will be 25 per cent for individual shareholders and 33.3 per cent if the shareholder is a company.

The People's National Party said in a release yesterday that it was not opposed to the principle, in itself, of a tax on preference dividends.

However, it said that "by introducing a new tax measure in a way which changes the value of existing shares, the minister has signalled to investors that they cannot rely on the continuity of our laws in fashioning their business arrangements".

The Opposition had proposed in the Budget Debate to impose a tax on interest from government paper, a suggestion that was dismissed by the Golding administration.

Shaw said then that the tax would be unfair to investors as its imposition would be akin to changing the rules in the middle of the game.

daraine.luton@gleanerjm.com