Tax Review Task Force recommends reduction in Personal Income Tax

ST JOHN’S, Antigua- The tax policy review task force set up last December is asking government to consider a reduction in Personal Income Tax (PIT) for different categories of income earners and to make up the revenue shortfall by increasing the Antigua & Barbuda Sales Tax (ABST) by 1 per cent.

The 24-member committee shared its recommendations with the public last evening at the Multi-purpose Cultural Centre, after press time. However, OBSERVER media was informed of the substantive recommendations before the consultations took place.

For taxpayers making between $3,000 and $15,000 a month, the recommendation is to reduce the tax rate from 10 to 6 per cent. For those making between $15,000 and $25,000 monthly, the rate would be reduced from 25 per cent to 15.

The committee will also recommend that government add two more categories of income earners for tax purposes: those grossing $25,000 to $35,000 monthly and those making $35,000 and above. They would be asked to pay rates of 20 per cent and 25 per cent respectively.

To pay for the decrease in PIT revenues the committee will ask government to consider an increase of ABST from 15 to 16 per cent.

Currently, only businesses making more than $300,000 in revenue per year are required to register to pay ABST. The recommendation is that government lower that threshold to $150,000 per year, thus increasing the number of taxable companies.

Other recommendations include reducing government taxation on allowances introduced last year and adding more deductions for PIT.

Committee Chair and Tax Specialist Neil Coates was a guest on OBSERVER AM yesterday when he announced that a reduction in PIT was a recommendation.

“There is a proposal to reduce Personal Income Tax; there is nothing on the table to remove Personal Income Tax,” he said.

“We have looked at it and in the current circumstances, we have made the determination to reduce the current rates and change up how the tax itself is being applied.”

Coates said current economic circumstances played into the committee’s decision-making. He added that he expects government to seriously consider what is proposed.

Leader of the Antigua Labour Party (ALP) Gaston Browne has been consistent in his pledge to do away with PIT entirely, if elected.

Browne concluded that government would not lose the entire revenue from PIT, which generated $43 million in 2012. He reducing PIT would leave more money in people’s pockets, and increased spending would drive up ABST revenues.

In July, however, a Ministry of Finance internal committee rejected Browne’s tax reduction plan, saying it was not plausible.

In a document, the committee concluded that the repeal of PIT would not only undermine government revenues but it would destroy the equity and sharing of the tax burden made possible by the progressive tax system.

The finance panel highlighted that the level of economic activity necessary to stimulate growth in the absence of PIT was simply unattainable. The panel said the economy would need to grow by almost 13 per cent to recover monies lost from removing PIT.

The public consultations will continue on Friday at the Multi-purpose Cultural Centre.

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