Minster of Finance and Planning, Dr. the Hon. Peter Phillips on Thursday (May 24) announced a raft of tax measures that will raise more than $23.4 billion to fund the gap in the $612.4 billion 2012/13 budget.
The Minister, who was opening the 2012/13 budget debate in the House of Representatives, said that a Special Consumption Tax (SCT) will be imposed on white over proof rum at the rate of $960 per litre of pure alcohol.
“The existing tax regime as it relates to over proof rum currently has a 30 per cent ad valorem rate. This will be rescinded. The impact of this measure will result in an increase of between $7 and $10 on the cost of a drink of rum,” Dr. Phillips said.
The SCT on over proof rum is expected to yield $0.75 billion and has an effective date of June 1, 2012.
He noted that the measure will impact the tourism sector where it is proposed to implement a specific tax rate of $700 per litre on alcohol used in the sector, to earn for the government, an estimated $0.53 billion. The effective implementation date is June 1, 2012.
In addition, a specific General Consumption Tax (GCT) regime for tourist accommodation is being proposed, with the rate to be applied per room, per night, based on the size of the hotel.
For hotels with more than 50 but less than 101 rooms, the rate is the equivalent of US$6 per room, per night; for hotels with more than 100 but less than 201 rooms, the rate is US$10 per room, per night; and for those with 200 rooms and above, the rate is US$12 per room, per night.
This tax measure will earn for the government an estimated $2.53 billion with an effective implementation date of September 1, 2012.
Also, a transitional arrangement will be put in place to deal with Corporate Income Tax. The rates applicable to unregulated companies will be reduced to 25 per cent, however, the present rate of 33 1/3 per cent will be maintained for regulated companies such as financial institutions, utility and telecommunications companies. The current rates for building societies and insurance companies will remain unchanged. As a result there will be an estimated loss of revenue of $0.10 billion.
However, it is proposed that a minimum income tax of $60, 000 be imposed on all registered companies.
Companies enjoying an incentive, which provides income tax relief, as well as self- employed professionals, will also be liable to pay the flat rate. The only exemptions from this tax will be companies in the first year of incorporation, charities and companies operating under Section 12 of the Income Tax Act.
This tax measure will earn for the government, an estimated $0.66 billion, with an effective implementation date of January 1, 2013.
In addition, a withholding tax of five per cent on dividends distributed to residents will be implemented, to earn an estimated $0.30 billion. It is also being proposed that the asset tax imposed on banks, financial institutions and securities dealers be increased to 0.2 per cent.
“The proposed tax will be payable on total assets including guarantee and letter of credit, but will be net of both international reporting standards and prudential loan loss provision. For non financial institutions, the asset tax regime will be modified to reflect a specific group based on the asset value of the institution. For example, for institutions with an asset value of less than $50,000, the asset tax will be $10, 000,” Dr. Phillips explained.
For institutions with asset value of at least $500,000, but less than $5 million, the asset tax will be $50,000, while institutions with asset value over $50 million will be liable for a tax of $100,000.
This tax measure will earn for the government, an estimated $1.95 billion, with an effective implementation date of June 1, 2012.
Motorists will also see an increase in the cost of motor vehicle licenses, as the cost of licence plates, fitness and registration fees will be increased by 50 per cent. This will earn an estimated $0.60 billion with an effective implementation date of June 1, 2012.
There will also be an increase in the tax rate on winnings in betting/gaming, horse racing and lottery. It is being proposed that the tax rate be increased from the current 15 per cent to 20 per cent with estimated revenue of $0.38 billion. The effective date for implementation is June 1, 2012.
It is also being proposed to introduce a specific SCT of $10.50 per 0.7 gram of unprocessed tobacco. This is expected to earn for the government, $0.38 billion. A SCT of $16.32 will also be applied to denatured ethanol for use in the blending of petroleum products and will earn an estimated $0.54 billion.
A tax of $0.30 per minute on all domestic calls terminated on a mobile network and fixed lines; and a tax of $0.075 per minute on all international calls terminated on a mobile network, will earn an estimated $5.25 billion, with an effective implementation date of June 1, 2012.
Meanwhile, Dr. Phillips said another $4 billion will be provided by the National Housing Trust (NHT) of which $3 billion represents payments of outstanding taxes owed to the government, and the remaining $1 billion is to be used to address infrastructure needs for specified housing schemes.
Debate on the 2012/13 budget will continue on Tuesday (May 29) with a presentation from the Opposition Spokesperson on Finance, Audley Shaw.
By Latonya Linton, JIS Reporter