House Approves Resolution to Increase Concessionary Loan Amount

A Resolution to increase the concessionary loan amount which is paid to employees in certain financial institutions was approved in the House of Representatives on January 27.

The Provisional Collection of Tax (Income Tax) (Confirmation) Resolution was moved by Minister of Finance and Planning, Dr. the Hon. Peter Phillips.

He noted that the change became necessary in order for benefits which are granted to workers in the financial institutions keep pace with current economic realities.

The Minister explained that workers within specified financial institutions, such as Bank of Jamaica (BoJ), Merchant Banks, Development Banks, Insurance Companies, Building Societies licensed under the Building Societies Act, and other institutions licensed under the Banking Act or the Financial Institutions Act should benefit under the concessionary loan policy.

The concessionary loan amount of up to $1.5 million can be used for one of the following: purchasing a house for owner’s occupancy, purchasing a motor vehicle or land,  and for education, training and emergency needs.

“Over time, due to the inflationary effects of the rising cost of living, the concessionary loan policy has not kept pace with the current realities, whether in terms of the interest rate levels or the threshold amount,” Dr. Phillips said.

He added that in respect of the threshold of $1.5 million, the sum was not reflective of the current cost associated with the stipulated purposes.

“As a consequence, the concessionary nature of the loans has been severely reduced. Another trigger for the amendment is that subsequent to 2002, when this policy was introduced, the non taxable ceiling for BOJ staff was raised to $7 million in order to keep staff compensation apace with current pricing realities, while for the other institutions, the non taxable thresholds remain at $1.5 million,” Dr. Phillips said.

“The disparity has not only placed staff at the other institutions at a disadvantage but has also highlighted the urgent need to raise the threshold amount,” he added.

The Resolution has raised the concessionary loan threshold from the current $1.5 million to $4.5 million. In addition, the interest rate for these concessionary loans has been reduced from 14 per cent to nine per cent per annum.

“The new rate is set at a cap of nine per cent per annum, which is two percentage points above the weighted average of the rate applicable to the Government of Jamaica Treasury Bill,” Dr. Phillips said.

He added that this matter has been raised persistently by financial institutions and by the trade unions that represent them.