Gov’t urged to settle $700-million debt with UDC

THE Urban Development Corporation (UDC) and the finance ministry are being urged to quickly settle the lingering issue of more than $700 million in outstanding statutory deductions which the UDC owes the Government as this could jeopardise employees’ access to their benefits.

“Statutories are so important that we have to set an example as a Government because private people aren’t allowed to relax and not pay taxes, and many of those statutory contributions are for employees who will ultimately [need them paid] if they need an NHT [National Housing Trust] loan and need to have their taxes paid, so it is something that we need to resolve quickly,” Member of Parliament for St Andrew East Rural Juliet Holness stressed at Tuesday’s meeting of the Public Accounts Committee (PAC), where the leadership of the UDC appeared to respond to questions about the auditor general’s August 2022 report. The report highlighted issues of poor asset management, financial challenges, and corporate governance failures, which have been unresolved for 10 years.

The audit was a follow-up to a 2012 audit, and repeated a significant number of the findings and concerns indicated in the previous audit.

The 2022 report noted that the UDC had paid over NIS, NHT and HEART statutory deductions but withheld education and income tax — amounting to $709.21 million up to May 2022, with balances outstanding from as far back as December 2016 — against liabilities which the Government owed.

The corporation, in its response to the audit on November 11, said it has engaged the finance ministry to arrive at a resolution to settle all amounts owed for the outstanding taxes.

The ministry advised the PAC that it had received a recent correspondence from the UDC regarding offsetting all of those taxes against the amounts that it is owed for lands that were transferred to the Jamaica north-south highway company.

“We haven’t gotten an opportunity to process that letter as yet. We have made accommodations in the past; in December 2016 we wrote to the UDC indicating that we would agree to an offset to the taxes which were owed at that time against the liability — that matter was settled in 2016. However, that was on the condition that the UDC would remain current with its tax obligations going forward,” senior director, public enterprises division in the Ministry of Finance, Alicia Bish explained.

At the same time, the finance ministry has no confirmation at this point that those amounts were written off in accordance with that 2016 agreement. Bish said the finance ministry would follow up with tax authorities on the status of the write-off. She said, however, that the UDC’s financial statements already account for the write-off, which means those amounts should not impact the taxes that have accumulated since 2016.

Holness, who raised the issue of the outstanding payments, argued, “I can’t understand how Government can owe, and then yet still demand that you must pay what you owe. We need to look back at that because we put UDC in an uncomfortable position of not being able to manage because you owe them money while you’re telling them they must pay up. We need to go back to the drawing board. That’s not fair to the organisation.”

Bish stressed that the ministry has been working with the UDC over a number of years to settle on compensation, including the transfer of lands to the entity. She noted that the Petroleum Corporation of Jamaica (PCJ) lands, valued at $3.2 billion, are in fact being transferred to the corporation as part of the compensation arrangement. This is in addition to budgetary support to the UDC to reduce the debt.

Holness pointed out, however, that land transfer is not necessarily able to generate revenue quickly enough to offset taxes.

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