KINGSTON — The Government will give up $330 million in revenues payable under new tax measures announced by the Minister of Finance and the Public Service, Hon Audley Shaw, in the House of Representatives on Thursday April 28.
It will cost the Government some $300 million for the reduction in fees on Probate, Letters of Administration and Transfer Tax on Death for estates that are in the system as of April 27, 2011. An additional $30 million in tax will also be lost to an amendment to the General Consumption Tax (GCT) to speed up payment of input tax refunds to taxpayers who purchase machinery or equipment valued at $100,000 or more.
The $330 million loss however, will be offset by $525 million in increases in: stamp duty on refinancing and transfer of existing mortgages ($75 million); removal of transfer tax and stamp duty on securities ($50 million); fees payable and transfer tax applicable to deceased estates files after April 27 ($220 million); and a review/change of import duty structure on motor vehicles, etcetera ($180 million), leaving a net surplus of $195 million from the new measures.
According to the Ministry Paper (33/11) tabled by the Minister on Thursday:
(1) Stamp Duty on refinancing and transfer of existing mortgages.
Effective May 16, 2011, where there is refinancing of a mortgage for equal amounts or less, Stamp Duty will be payable at the nominal rate of $100. Where there is an increase in the value of the mortgage, the applicable duty rate will be payable on the difference. The revenue gain from increased activities is estimated at $75 million.
(2) Removal of Transfer Tax and Stamp Duty on securities.
Effective May 16, 2011, to facilitate the issuance and trading of registered corporate bonds (securities), the Stamp Duty and Transfer Tax will be removed. The exemption will extend to all companies whether or not registered on the Stock Exchange. The revenue gain from increased activities is estimated at $50 million.
(3) Reduction of Fees on Probate and Letters of Administration and Reduction of Transfer Tax on Death for estates that are in the system, as at April 27.
Effective May 16, 2011, the fee (Stamp Duty) on Probate and Letters of Administration for applications filed on or before April 27, 2011 will be a flat $5,000. Where payment has been made on the old basis, no refund will be allowed. Transfer Tax on Death for those applications will be chargeable at the rate of 1.5 percent, down from the current 4 percent. Where deposits on transfer tax have been made in excess of 1.5 percent, no refund will be allowed. The revenue loss is estimated at $300 million.
(4) Fees payable and transfer tax applicable to deceased estates filed after April 27, 2011
Effective May 16, 2011, the existing fee structure applicable to deceased estates will be abolished. Thereafter, fees will be applied as ad valorem stamp duty, as follows: estates whose net value is $10 million or less, $5,000; estates whose net value is above $10 million and below $20 million, $10,000; those above $20 million and below $30 million, $15,000.00; those above $30 million and below $40 million, $20,000; and those above $40 million, $25,000. The applicable transfer tax on death is reduced from 4 percent to 1.5 percent. The revenue gain from increased activities is estimated at $220 million.
(5) Amendment to GCT Act.
It is proposed that, effective May 2, 2011, the time that GCT registered taxpayers, who purchase machinery or equipment valued $100,000 or more, have to wait to claim input tax credit be reduced from 24 months to three months. The revenue loss is estimated at $30 million.
(7) Contractor’s Levy.
Effective for financial year 2011/12, where the 2 percent Contractor’s Levy has been deducted from the contract sum of a contractor and is paid to the Collector of Taxes, any amount, not utilised as a credit for income tax for that year of assessment, can be forwarded to subsequent periods, not exceeding five years. The revenue loss is estimated to be nil.
(8) Review of the Import Duty Structure on Motor Vehicles, increase in annual motor vehicle licensing fees and GCT on second sale of motor vehicles.
Effective May 2, 2011, the CET applicable to motor cars (including SUVs) is to be reduced from 40 percent to 20 percent. The CET on vehicles commonly referred to as pickups will be increased from 10 percent to 20 percent. The CET on bikes with engine sizes below 300 cc and 600 cc will be reduced to 10 percent and 20 percent, respectively. In addition, CET on all-terrain vehicles (ATVs) will be reduced to 20 percent. The CIF value to which the current 20 percent duty concession is applicable be increased from US$25,000 to US$35,000 (J$3M). The US$25,000 was implemented in 2003. GCT payable on second sale vehicles will be increased.
A licensed taxi operator who acquires a bus with less than ten seats, for public transportation, will pay aggregate duty of 36 percent (diesel). The annual motor vehicles licensing fees will be increased by $1,000 (including for motor bikes). This is applicable to fees which are currently below $12,000. The revenue yield is estimated at $180 million.
By BALFORD HENRY, JIS Reporter & Editor