Taxes To Rise In St St Vincent


MNI Political Reporter

Release Date

Tuesday, January 21, 2014


Prime Minister Dr. Ralph Gonsalves has announced an increase in the excise tax on gasoline as he insisted that the government’s fiscal policy for 2014 will continue to be a mixture of prudence, patience and enterprise.

Gonsalves, delivering the budget statement on Monday evening in the wake of the devastating Christmas floods that have left EC$330 million (One EC dollar= US$0.37 cents) in losses and damages, also announced lower gasoline prices and increased diesel price as part of the government’s regular review of the retail prices of these fuels.

Parliament on December 9 approved the Estimates of Revenue and Expenditure for 2014 totalling EC$911.57 million and Prime Minister Gonsalves said that the Christmas Eve floods have "altered profoundly the immediate socio-economic context of the 2014 budget.

"The upshot of this is that the 2014 Estimates which were approved in December 2013, and upon which the 2014 Appropriation Bill is based, has to be supplemented with the next four to six weeks or thereabout," he told lawmakers.

He, however, said that while the budget was interim in nature, "this does not mean it is provisional or temporising on fact or law.

"This budget is aimed at strengthening our socio-economic base for recovery and reconstruction after a natural disaster in a context of on-going global economic uncertainty and downside risks," Gonsalves told Parliament.

He said that the supplementary estimates and appropriations bill to be brought before Parliament would contain "both altered and additional provisions to reflect the profoundly changed circumstances of our country.

"Altercations and additions are to be expected on both the recurrent and capital sides of the approved Estimates," Gonsalves said.

He said that preliminary estimates from the natural disaster, which left nine people dead and three others missing, tells "a horrendous story" as far as loss and damage to infrastructure and agriculture is concerned.

The World Bank has estimated the damages and losses at EC$291.4 million or 15 per cent of gross domestic product GDP, but Gonsalves, however, said that the World Bank’s figure underestimates the damage to agriculture by nearly EC$5 million and does not include damage assessment to the forest.

He told lawmakers that the Food and Agricultural Organization (FAO) estimates the damage and loss to the agricultural sector at EC$8.4 million, and to forestry at EC$24 million.

"It is a monumental blow to our society and economy; damage of between 15 and 17 per cent of GDP is huge and devastating," Gonsalves said.

Opposition Leader Arnhim Eustace will lead off the debate on the fiscal statement later on Tuesday.

Prime Minister Gonsalves said the EC$0.50 cents increase a gallon in the excise tax on gasoline would not apply to diesel used in the production of electricity, which will continue to be exempted.

He said the increase in the tax is not expected to have any "immediate, significant upward impact" on the piece of fuel at the pump, as prices have been trending downwards in recent months.

In the case of gasoline, the entire 50 cents can be accommodated by the lower price of the fuel, which has moved from EC$14.08 to EC$13.95 per gallon.

However, the price per gallon of diesel has increased from EC$13.32 to EC$13.67.

Gonsalves said that in the current economic situation, globally and nationally, there was little room to raise taxes or large amounts of additional revenue.

"Similarly, there is little room to lower tax rates or to make additional tax concessions," he told lawmakers in the budget speech, which comes in the wake of the devastating Christmas floods..

"Our fiscal policy stance for 2014 will therefore continue to be a mix of prudence, patience and enterprise," Gonsalves said, noting that in 2013, there were deficits on the current, primary, and overall balance of 2.3 per cent, 3.9 per cent, and 6.3 percent of gross domestic product (GDP), respectively.

"The recurrent expenditure was reasonably restrained save and except for the ballooning cost of pension and retirement benefits and salary increase occasioned by the built-in 2 per cent increment and the 1.5 per cent back-pay from January 1, 2011," he said, in reference to a salary hike due to public servants since 2011 but paid last year.

A 7.2 per cent decline in revenue during 2013 also contributed to the current account deficit.

"The decline in revenue was disappointing coming as it did in a year when nominal GDP was estimated to have grown by approximately 5 per cent," Gonsalves said, noting that while capital receipt increased almost four-fold, it was not enough to outweigh the increase in capital expenditure of almost 180 per cent.

"As a consequence, the overall deficit widened," he said.

Gonsalves also said there was a decline in tax buoyancy, saying this was attributable to weakness in tax administration at the major revenue collection departments, low and declining level of tax compliance by certain taxpayers, and increased level of tax concession, particularly ad hoc concessions.

Prime Minister Gonsalves said the need for continued institutional strengthening and capacity building of the major revenue departments has become more evident.

He said it was unlikely that capital projects for which funding has already been specifically sourced and which are ready for imminent implementation would be shelved.

"However, the scope of some existing capital projects is likely to be altered and additional allocations made," he said, adding that the capital projects of an urgent and critical nature not now present in the approved Estimates for 2014 would be included in the Supplementary Estimates.

"Clearly, there would be a reshaping of budgetary priorities in accordance with the requisites of addressing effectively the extant humanitarian challenge arising from the natural disaster and of implementing in a focused way the grand project of rehabilitation and recovery under the rubric Arise SVG with the six Rs: Relief, Reconstruction, Roads, (including bridges), River Defences, Reforestation, and Relocation (including housing)," Gonsalves said.


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