Gov’t Announces $18 Billion In Tax Cuts

Reduction of the General Consumption Tax (GCT) rate from 16.5 per cent to 15 per cent is among $18 million in tax cuts announced by the Government.

The objective is to stimulate economy activity and to continue the reform of the tax system towards greater levels of equity, efficiency and simplicity.

The GCT cut, effective April 1, 2020, will result in potential revenue loss to the Government of $13.96 billion.

“A cut in the rate of GCT will leave more disposable income in the economy, which will boost economic activity, which would benefit all households and firms,” Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke said, as he opened the 2020/21 budget debate in the House of Representatives on March 10.

The last adjustment to the standard rate of GCT was in June 2012, when it was reduced from 17.5 per cent to 16.5 per cent.

The proposed reduction is expected to result in increased compliance by tax payers, while incentivising all sectors, through lower upfront cost and increased cash flow, which will serve to encourage growth in the economy.

Dr. Clarke also announced a reduction in the assets tax rate from 0.250 per cent to 0.125 per cent, effective in the next assessment year. This will result in a potential revenue loss of $3.02 billion.

“The responsiveness of the financial institutions to this reduction in terms of expanding their asset base, especially by lowering further interest rates and supporting expansion of the domestic economic activity, will determine how quickly we reduce any further,” he said.

Also announced were new income tax credit of $375,000 for companies (regulated and unregulated) with annual sales/revenue less than or equal to $500 million.

This is in addition to the employment tax credit available to unregulated companies and must be utilised within the year given, and can neither be carried forward nor result in a refund

This measure is expected to result in potential revenue loss of $1 billion and is effective for the year of assessment 2020.