Financial expert believes gov’t should lower customs duties in lieu of granting waivers

Former IMF economist Dr Thomson Fontaine
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By Kadeem Joseph

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An economist is suggesting that the government consider decreasing customs duties in a bid to ultimately increase the amount of taxes it collects.

During last Thursday’s Budget presentation, Prime Minister Gaston Browne disclosed that in 2019, of every $1 that was collected by the Customs and Excise Division, an equivalent amount was waived, and to that end a decision had been made to gradually reduce the total tax exemptions to no more than 25 percent of potential revenue.

The PM said while the law will maintain some allowance for waivers in support of business activity and major investment, such waivers will not exceed 50 percent of the applicable charge.

But Dr Thomson Fontaine said that lowering customs taxes may be a more “prudent” step for the government, noting that these duties may be especially high because of an absence of income tax.

“The fact that you have to give half away in waivers means that the rates are too high, so looking at the structure of the customs system is probably one way in terms of having some serious tax reforms in Antigua,” he added.

The former International Monetary Fund employee described the large amount of waivers the government grants as “shocking”, noting that it is “clearly leakage” in the government’s tax collection system.

“It is a problem that has plagued Antigua and Barbuda for many, many years and I am not convinced that this [improving tax collection] is going to happen in a short period of time,” Dr Fontaine said.

“Obviously, you would need to strengthen very much not only the compliance, but how you pursue those who apparently continue to receive legal waivers.”

Despite the challenge the government may face in attempting to boost revenue through increased tax compliance, the economist believes that the government will have to address the matter if it seeks to improve revenue.

Meanwhile, economist and lecturer of Economics at the University of the West Indies, Cave Hill Campus, Dr Ankie Joseph-Scott said while the reduction of waivers is a “good effort” by the government, it will not achieve the expected benefits within the short-term. “These require more fundamental and institutional regulation and arrangements to ensure front, middle and back offices are all in line,” she said.

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