Photo above: St. Vincent and the Grenadines Prime Minister, Dr. Ralph Gonsalves.
By Kenton Chance
CMC Caribbean Correspondent
KINGSTOWN, St. Vincent, Feb 23, (CMC) – The St. Vincent and the Grenadines government has announced tax increases, as it presented the EC$912 million (One EC dollar =US$0.37 cents) budget to Parliament on Monday.
Prime Minister and Minister of Finance, Dr. Ralph Gonsalves, said, the new taxes would include a two per cent levy on mobile telephone and international calls.
But it is not clear whether or not the legislators of the main opposition New Democratic Party (NDP) would participate in the debate on the fiscal package, as they continue to protest the results of the December 9 general elections last year, when the ruling Unity Labour Party (ULP) won a fourth consecutive term in power.
“I intend to impose a levy of two per cent on mobile telephone calls and on international calls — all calls — to be paid directly into the Zero Hunger Trust Fund, in accordance with a specific statute law,” Gonsalves told legislators.
The new tax on cell phone calls is in addition to increases in property tax on commercial buildings, driver’s licenses, gun licenses, and the introduction of Value-Added Tax (VAT) on a number of items, including chicken, lentil, salt, butter, yeast and baking powder.
Gonsalves said, the tax on mobile telephone calls is expected to result in EC$2.7 million for a proposed Zero Hunger Trust Fund, which, he said, is central to the draft National Zero Hunger Action Plan.
The Trust Fund will support the multifaceted efforts, needed to eliminate hunger in St. Vincent and the Grenadines and establish a model approach that can be replicated across the Caribbean, Gonsalves said.
He told parliament, that the Ministry of Social Development has the names and addresses of every individual on the island, who is in extreme poverty and susceptible to hunger.
“So we are not just going to deal with this in a general way. We have to address each of the persons specifically.
“I just want to say this: we love to talk a lot on the phone. So when you talk for a dollar, know that two cents out of that dollar is going inside of a fund to help to bring an end to hunger. I don’t think that people will be opposed to that at all,” he said.
Gonsalves said, the list of VAT exemption here, is much wider than in other developing, small-island states.
He said, that to widen the tax base and improve buoyancy, his government will introduce VAT on packaged rice for retail sale; table and cooking butter; brown sugar; and whole chicken and chicken parts, except chicken back, neck and wings.
The VAT exempted items that will be made taxable are: lentil and pigeon peas; cooking oil, except coconut oil; shortenings; salt; yeast; and baking powder.
Gonsalves said, these measures will take effect from May 1, and told parliament that the revenue yields from these items, is estimated at eight million EC dollars annually.
Gonsalves announced an increase in excise tax on beverages including beer, malts, stout, wines of fresh grapes, brandies, whiskeys, and vodka. Strong rum will be exempted from the increase.
“I should point out that the proposed rate for beer, for instance, 83 cents per litre, we are really bringing that in line with what is paid locally already. The imported beer is paying less,” Gonsalves told lawmakers, adding that the 0.06 per cent rate paid as property tax on commercial buildings will be increased to 0.08 per cent, matching that paid on residential properties.
He said that at the time of introducing the property tax some years ago, his government had said that the 0.06 per cent rate was a temporary arrangement to give businesses time to adjust to the new system.
The new rate will come into effect from the current tax year, Gonsalves said and will contribute a further EC$300,000 annually to the government’s coffers.
Gonsalves said most of this money will go to the Kingstown Town Board.
“As you are aware, a priority in the government in 2016 is the cleaning up of Kingstown and improving its appearance. So, we need some more money,” Gonsalves said.
He announced a 25 per cent increase in motor vehicles’ and drivers’ licences for the various categories.
“This is estimated to give an increase of three million dollars,” Gonsalves said.
He said, to illustrate how the new tax would work, private motorcars not exceeding 2,000 tare weight, was EC$325, but will now be EC$400. Those that paid EC$410 will now pay EC$520.
Gonsalves said, that imported vehicles, beyond a particular age, create environmental challenges.
He said, that unlike some other CARICOM countries, St. Vincent and the Grenadines does not impose a ban on the importation of vehicles older than four years old.
However, motorists pay a special surcharge, which was last adjusted in 2008. The government will increase the surcharge by 15 per cent for each category. This is expected to generate EC$500,000 annually.
Gonsalves also announced, an increase in the fees payable for residence permits, work permits, citizenship, gun licences, and land taxes.
“The rates of land taxes have not been adjusted for over 20 years, despite the significant appreciation in prices since then,” Gonsalves said.
“The estimated revenue yields from all of these very small fees and other charges, approximated three-quarts of a million dollars.
“And that is the way I intend to collect an additional 20 million dollars or one per cent of gross domestic product (GDP) to deal with the financing for economic growth and job creation,” Gonsalves said.
Before announcing the fiscal measures, Gonsalves said, that since the global financial meltdown of 2008, it has become increasingly difficult for member countries of the Eastern Caribbean Currency Union, including St. Vincent and the Grenadines, to raise the necessary resources to finance their growth and development.
He said, a number of fiscal consolidation and debt-restructuring measures have been implemented by his government toward fiscal and debt sustainability. Additionally, tax measures have been introduced to increase revenue intake.