REVENUE GROWTH PLAN

By Linda Straker

Withholding a tax on lottery winnings, a tourism marketing levy and increasing user fees are among initiatives to be taken by the Grenada Government during the upcoming budgetary years as it embarks on efforts to increase its revenue.

Though they were mentioned during pre-Budget discussion, Prime Minister Dr. Keith Mitchell, who is also the Finance Minister, announced the new measures on Tuesday when he delivered the 2014 Estimates of Revenue and Expenditure at the Trade Centre.

Other measures aimed at raising revenue for Government will be the lowering of the income tax threshold to EC$36 000; increasing property tax; a reduction on manufacturers rebate; restoration of the standard VAT on selected construction materials; and the fees from the Citizenship by Investment Programme.

Dr. Mitchell, in his more than two hours speech, told the packed Trade Centre that in our system of democracy, citizens pay their taxes and the Government delivers vital services to citizens.

“It is a contract. No country can run without taxes. Mr. Speaker, every taxpayer must pay his or her fair share,” he said, while explaining that his Government, which is presenting the second Budget since winning the February 19 General Election, will be using three approaches to encourage and enforce tax compliance. These will be adjustment to tax policy; stronger tax administration; and reduction of tax concessions.


Elaborating on the decision to increase Property Tax, Dr. Mitchell said that Grenada has one of the lowest property tax rates in the Caribbean and from January 2014, the property tax rates will be
increased, in some cases by 100%.

“Land: 0.2% from 0.1%; Building: 0.3% from 0.15%; Agriculture lands: which remain idle will attract a rate of 0.2% instead of 0%. It should be noted that the exemption of the first $100 000 on your building value will be maintained. Owners of very small parcels of land worth less than $20 000 will now pay a Minimum Tax of $40 instead of $20. Owners of land and building worth less than
$100 000, where the exemption applies, will now pay $60 instead of $30,” he said.

“Government has not increased the Property Tax rates for commercial and industrial purposes. This decision has been taken in recognition of the difficulties that the business community has experienced in recent years and Government’s strong desire to spur job creation,” he said, as he pointed out that with this rate adjustment, Government expects to collect an additional $8.0 million in property tax next year.

With regards to the Tourism Marketing Levy, the Finance Minister said that the Government and the tourism industry both agree on the urgent need to increase the marketing of Grenada as a destination of choice.

“In this regard, Government will introduce a Tourism Marketing Levy of US$5 per night for each stayover visitor. The funds collected from this Levy will be used exclusively for marketing Grenada and will be collected by Government and channelled to the Grenada Tourism Authority for the sole purpose of marketing Grenada,” he told the audience, which reflected a wide cross-section from the business community.

Two million is expected from Withholding Tax on Lottery Winnings from a 15% withholding tax and by registering and licensing slot machines and games of chance.

While no projected amount was given for Increased User Fees, he said that there are some user fees and licences that have not been revised for several years and as a general principle, Government will revise fees to better reflect the cost of these services.

“In this regard, umbrella legislation will be taken early in the new year to adjust fees for selected services,” he said.

However, Parliament recently approved an increase in a number of fees relating to the traffic regulations and for passengers boarding yachts from Grenada.

The 2014 Estimates of Revenue and Expenditure provides for total expenditure, including principal repayments of EC$933 932 530. The overall budget can be summarised as follows: Recurrent Revenue: $471.1 million; Recurrent Expenditure: $487.0 million; Current Account Deficit: $15.9 million; Primary Deficit (after Grants): $44.0 million; Capital Expenditure: $262.0 million; Principal Repayments/Amortization: $185.0 million; and overall Deficit (after Grants): $139.4 million.

The seven largest allocations are:

1. Debt – $280.4 million (30% of total expenditure).

2. Ministry of Education and Human Resources – $110.2 million (11.8% of total expenditure).

3. Ministry of Youth and Sports – $70.1 million (7.5% of total expenditure).

4. Ministry of Health – $67.2 million (7.2% of total expenditure).

5. Ministry of Finance and Energy – $57.3 million (6.1% of total expenditure).

6. Pensions and Gratuities – $51.4 million (5.5% of total expenditure).

7. Ministry of Works – $50.4 million (5.4% of total expenditure).

Dr. Mitchell said that the Overall Deficit of $139.4 million or 6.2 per cent of GDP will be financed from domestic and external sources. A loan authorisation bill to raise $140 million in financing to support implementation of the 2014 Budget accompanies the 2014 Appropriation Bill. Most of the external financing will be direct support for Grenada’s Home-grown Programme.