Government to implement tax for online purchases

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By Elesha George

[email protected]

The government will be seeking to amend the Antigua and Barbuda Sales Tax (ABST) Act to include taxes for online purchases.

Prime Minister Gaston Browne said the measure is to prevent the practice of tax avoidance and tax evasion and stop persons from manipulating government revenues.

According to Browne, “The government is considering amending the ABST legislation to allow for the application of the ABST to online purchases to include Amazon.”

He said that a lot of purchases are now taking place online and that the government wants to ensure taxes are paid for these online purchases.

 He noted that before, it was local businesses that were paying the full duties and taxes to the port.

“We now recognise that these online imports have been used to manipulate government’s revenues, it is impacting on the amount of revenues and we have the unfortunate situation where some of these individuals who provide these logistic services, they’re stealing government’s revenue,” he explained.

Browne, who insisted that this was not a new tax, said more details would come when the government found a methodology to apply the measure.

The amendment is one of several interventions outlined in the government’s Medium-Term Fiscal Strategy (MTFS), which it intends to introduce to ensure that the tax yield does not fall below 20% of the goods and services provided by the state – Gross Domestic Product (GDP).

The plan, which is expected to be executed over the next three to five years will include an end to tax exemptions and duty-free waivers “for anything that is not firmly linked to provisions under the law.”

The government will also move to improve revenue collection from property taxes by increasing compliance from less than 50% to 70% in 2021 and up to 80% by 2025. 

In addition, the prime minister said tax audits and improved tax administration, will cause a 15% increase in compliance for corporate income tax and unincorporated business tax by 2023.

“Mr Speaker, careful note should be taken that, in 2019, of every $1.00 that was collected by the Customs and Excise Division, an equivalent amount was waived. This is not acceptable nor sustainable. Therefore, the decision has been made to gradually reduce total exemptions, to no more than 25% of potential revenue,” Browne said.

The Revenue Recovery Charge Act (RRC) is also expected to be amended in the first quarter of 2021, to limit the waiver of the 10% charge.

With effect from March 2021, RRC exemptions will only apply in a few cases, including for current exemptions in the law for agriculture and fisheries inputs and equipment; medicines and pharmaceutical supplies; and entities with which the Government of Antigua and Barbuda has International Assistance Agreements.

“Mr Speaker, while the law will maintain some allowance for waivers in support of business activity and major investment, such waivers will not exceed 50% of the applicable charge,” he added. 

Furthermore, with effect from February 1, 2021, no exemption will be granted where the Cost, Insurance and Freight (CIF) value of imports is $10,000.00 or less.

The Tourism Accommodation Levy (TAL) which was delayed in 2020, will also be implemented in 2021.

It will now be instituted on May 1st and will fund the Climate Resilience and Development Fund.  The TAL along with a portion of the additional revenues yielded from the RRC, will be deposited to the Climate Resilience and Development Fund.

According to Browne, this will be a special fund whose purpose is to finance projects and programmes that will build climate resilience, provide a fiscal buffer for public finances in times of natural disasters and economic shocks, and support development of our country.

This means that from February 1st, tourists vacationing in hotels, guest houses, apartments, AirBnB rentals, and villas will pay US$3 per night per guest for all room rates that are US$150 or less; and US$5 per night per guest for all rooms that are over US$150. 

The comprehensive fiscal strategy document is being finalised and is expected to be published in the coming weeks. 

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