Finance Minister Audley Shaw, a short time ago, announced the implementation of the long awaited $1.5 million tax plan. Mr Shaw was making his budget presentation for this fiscal year. The plan was the centerpiece of the JLP’s manifesto in the recent General Elections held on February 25, 2016. There was uncertainty as to whether the package would be instituted. Today, the Finance Minister Audley Shaw made it official.
However, the government plans to “phase it in,” with the threshold raised to $1.275 million on July 1, 2016, and the full $1.5 million package will be effective April 1, 2017.
For the first year, the package will cost the government $12.5 billion. The package will cost $14.1 billion in the second year.
To finance the package, the government has announced 4 new revenue measures effective May 13:
- Increase in Special Consumption Tax (SCT) on cigarettes from $12-$14 per stick. This is expected to yield $574 million for the remainder of the fiscal year.
- Increase in SCT on Fuel Oil to yield $1.415 billion (effective tomorrow).
- $7 increase in SCT on petrol to yield $6.489 billion.
- Increase in Departure Tax from $14-$35 which will yield $5.3 billion.
Minister Shaw stressed that the government is moving away from direct taxes and towards consumption based taxes, so the government will earn when citizens decide to spend.
However, persons earning $6 million or more will see their PAYE tax rate increase from 25% to 30%. With the increased $1.5 million threshold, this will reduce their effective rate to 27.5%.
As with any new tax package by any government, it is expected that there will also be backlash against the new tax increases.
With the increase in fuel and petrol, the revenues could have an overall inflationary effect. Whenever fuel goes up, almost all prices go up as well.
It is left to be seen if this tax package will be beneficial to the country, or whether the revenue package will end up having an overall negative impact on the already struggling economy.