Govt Postpones Allowance Tax

Details

Economy

Wednesday, 22 February 2012 02:30

By caribarena news

Antigua St John's - Finance Minister Harold Lovell has announced that the government has decided not to move forward with the initially proposed implementation date of March 1, 2012 for allowance taxation, since ongoing consultations have made the date “no longer practical”.

He told a gathering of private citizens during a ABWU-organised consultation on Tuesday night that the new date could be April 2, if all goes well with the negotiation process.

Attending the forum were Prime Minister Baldwin Spencer, Revenue Reform Manager Everett Christian, Economist Gail E Gordon, Ralph Warner – acting commissioner of Inland Revenue Department (IRD) and ABWU General Secretary Senator David Massiah.

Prime Minister Baldwin Spencer said in a brief statement on the matter that the move will give the government the opportunity to address the question of the tax net and the ability to cast it wide enough to include all taxable areas. It will also ensure that the necessary mechanisms are in place for collection.

He said the government had already given leeway on allowance taxing when it “took the rap” in 2005 by not imposing that aspect of the income-tax law, and it is time for the ship of state to receive that tax in order to stay afloat.

“It is not something that we are just rushing into," the prime minister said. "If we do not seek to deal with the situation and generate some much needed revenue to meet our obligations to local creditors… and generate some more income to keep social income alive, it is my view that we are going to create a more disastrous situation for the economy of Antigua & Barbuda. You have to look at the lesser of the two evils to be able to address the situation."

He appealed for understanding from the public to avoid a “more difficult” situation that could result in the “collapse of the government”.

Minister Lovell pointed out specifically that there have been new amendments to the document that have not yet been made public. He said the process of discussion has been ongoing for some time, but the government was somewhat limited in going forward in that while it was holding these discussions with groups, it felt that it would be ill advised to make any pronouncement while the talks were ongoing.

"There are still a few issues that we are to get back with the stakeholders on," he said. "But I believe we have reached a point of agreement on the vast majority of issues."

The minister reiterated that it is not a new tax being proposed, and that the government was not going after the average man in the street, but looking to plug the loophole between salaries and allowances earned by upper-management personnel.

Anyone earning under $3,000 monthly will not be affected. In fact, Lovell pointed out that 64 percent of public servants and over 70 percent of private sector employees would go untouched based on statistics available to the ministry. Pensioners who get more than $3,000 will be affected.

"No government enjoys levying a tax," Lovell said. "It is the surest way to be unpopular, and it is one of those things that people just do not like. There is no joy in implementing the provisions of the 2005 personal income-tax act. But it must be done in the interest of the country."


The finance minister maintained that the move is necessary since the 2009 recession.

"We have come to the point where we find it necessary to move in that direction," he said. "It is part of the fiscal consolidation programme… We don't have a lot of options."

He maintains that Antigua is still the lowest taxed country in the OECS with the highest standard of living, even with the new implementation. He is hoping to achieve a "fair" system that will see everyone paying in accordance with what they earn.

Allowances to be taxed include housing, travel, and meal allowance. The employee share purchase plan will not be taxed, nor will benefits available to staff members across the board.

Attendees questioned the government’s plans for collection, since it is already having trouble collecting outstanding revenue, and the fact that there was no fixed tax percentage on travel allowances.

Lovell explained that for the government to improve its collection efforts, it must first close the loopholes within its control.


People also complained that in 2005, when the tax was drafted, there was money to go around, and the public might not have had much of an issue with it then. But now, in 2012, when there is no money, the government has moved to implement the tax.

“How much of our current taxes on the books, are being collected?" one attendee asked. "Why enforce more at a time when it would cost you your office?” He also admitted to not paying property tax for the past three years, but has not been confronted for it by the Inland Revenue department, which is looking to collect more.

The general consensus from the floor was not in contention with the need to pay their fair share of taxes to ensure the country functions, but rather that the system of collection seemed to be missing a certain class of people. Some proposed that the implementation be postponed for the rest of the year to give people more time to prepare for it.

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