Prime Minister Gaston Browne yesterday announced that, effective April, personal income tax will be abolished in its entirety, reports the Jamaica Observer.
The prime minster, who made the announcement in his presentation of the 2016 Budget yesterday, said this was a promise made to the people of Antigua and Barbuda during the election campaign.
“That was a major campaign promise and my Government honours its word to the people. Promise made, promise kept. Abolishing personal income tax is an important reform. Not only will it put more money in the pockets of the people, so that they can save or spend more for the benefit of the economy as whole, it will help to re-establish our country as one of the most competitive in the Caribbean and beyond.”
He said with the elimination of the income tax, more than EC$30 million (One EC dollar =US$0.37 cents) will be back in the pockets of the people.
“The cost of collecting PIT (personal income tax); the difficulty of enforcement; and its unfairness, with most of the self-employed not paying or not paying their fair share; make it sensible to remove the PIT from our books,” said Browne who is also finance minister.
He noted that with this move, Antigua and Barbuda will be a location that is competitive and also the choice of retirees.
“Antigua and Barbuda will become a competitive location to attract the headquarters of companies and for professionals to relocate, thereby creating more jobs. Retirees will choose Antigua and Barbuda as their retirement home; Citizenship by Investment Programme (CIP) investors will invest and choose Antigua and Barbuda over our competitors,” said the prime minister.
“… Concerning the loss of $37 million in revenue with this decision, the elimination of the PIT will be partially substituted by an increase in the Revenue Recovery Charge from 10 per cent to 13 per cent, which is expected to yield an additional $20 million in revenue. “
He added that all food items in the basket of goods will be exempt from this increase.
“Therefore, to those who speak of the regressive nature of consumption tax, we say a little learning is a dangerous thing, taxing income is destructive to investment, savings and consumption. Also, it penalises entrepreneurship. “
He said abolishing personal income tax will increase individual disposable income, not only for consumption but investment, and this is one of the necessary steps for mass wealth creation and income redistribution.
“We expect a more buoyant and expanded economy to empower the Government with increased revenues to fund the socio-economic development of the masses.”
Regressive taxation must be considered in the context of the entire tax ecosystem; transfer payments and welfare support provided by Government, including socialised health care, education and subsidised services.
According to the prime minister, when all these measures are taken into account, higher income earners do pay the most taxes in Antigua and Barbuda.
He said that based on this, additional measures will be made to compensate for any loss in revenue.
These include the establishment of a Revenue Court, which will allow for the efficient and effective enforcement of tax collection; an adjustment to the corporation; and business legislation and the introduction of the Unincorporated Business Tax Act.
A fourth measure will target the smuggling of alcohol and tobacco products into the country which robs the treasury of revenue.
The prime minister also told legislators that a security bond mechanism, utilised in several other countries, will be introduced and used to identify legally landed alcohol and tobacco products.
“These measures combined will ensure that together with the three percentage point increase in the Revenue Recovery Charge, there will be full replacement of revenue loss by the removal of personal income tax.”
Concerning the cost of fuel, Browne said as of February 1, the Government will reduce the price of gasoline and diesel.
“The price per gallon of gasoline will be reduced from $13.50 to $12.50, and the price per gallon of diesel will come down from $13.20 to $12.20.”
He, however, noted that the consumption tax on gasolene and diesel will not be reduced “until my Government had stabilised the financial system and laid a foundation for the future”.
In the area of manufacturing, Browne said the Government has signed a memorandum of understanding with Brewtech to establish a modern brewery in Antigua and Barbuda that will manufacture a range of products for domestic use and export.
“The products will include beers, stouts, malts, aerated beverages, sodas, juices and sports drinks. The people of Antigua and Barbuda will see a direct benefit from this project as the Government will hold up to 20 per cent equity in Brewtech.”
In the agricultural sector, he disclosed that the Government will boost agricultural production in the private and public sector.
“We will expand the defence force and prison farms, which will also include animal husbandry, to provide produce and meat for Her Majesty’s prison, defence force, and other government institutions.
“The Government will also focus on reorganising the Agriculture Development Corporation to boost production. Funding will be made available through the Antigua and Barbuda Development Bank for the development and expansion of the farming sector.”