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PM Mitchell announces 1-month delay in implementing tax increases

Prime Minister and Minister of Finance Dickon Mitchell: more time is needed to consult with stakeholders on proposed tax increases

Prime Minister and Minister for Finance Dickon Mitchell has announced a 1-month delay in the implementation of various tax increases as announced in the 2023 budget, which were expected to take effect on February 1.

“We need the additional time to make sure that the items are clearly identified, classified (and) published, and that there is no ambiguity, and so we felt that we needed the additional time to do so and to communicate with the stakeholders who would be impacted by this measure,” the Grenadian Leader told reporters on Tuesday.

The Prime Minister said that a decision was also taken to defer the Value Added Tax (VAT) increases on sugar, drinks with high sugar content, and carbonated beverages from 15% to 20% to March 1.

The announcement was made during the government’s first post-cabinet media briefing for the year, days after both Houses of Parliament approved amendments to the First and Second Schedule of the Excise Act, during special sittings last week Friday, giving legal teeth to a 95% increase in the Excise Tax from 105% to 200%, while alcohol will increase from $1.10 and $4.40 per litre to $1.50 and $5 per litre, respectively.

The amendments will result in an increase in both the wholesale and retail price of most alcohol products, including beer, wine, whisky, rum, brandy, vodka, gin, and liqueur, as well as all tobacco, and tobacco substitute products such as cigars, cheroots, and cigarettes.

Opposition Leader Dr. Keith Mitchell did not support the Resolution, which is one of several measures aimed at raising revenue for the Dickon Mitchell-led administration, which is expected to lose $30 million due to relief measures announced in the 2023 budget.

“I understand the objective of the Government. It’s an attempt to raise revenue based on the perception that there will be a drop in revenue from other areas… The problem is whether, in fact, that objective will be met,” Dr. Mitchell contended.

The former Prime Minister and Minister for Finance recalled that in 1996 his New National Party (NNP) administration enforced a similar measure, which did not reap the desired financial results.

He also called on the Government to clarify the goods that will be directly affected by the amendment, which speaks about alcohol and alcohol-related products.

“I think the Government needs to make it very clear, because there are items that have a serious alcohol content that may not necessarily be part of this, and it must be clarified,” he argued.

“For example, you have bay rum, methylated spirits that are used for specific things, even the question of sanitisers, some of them are strong alcoholic content, and ammonia for cleaning. I think the Government needs to clarify exactly what products, because when the public servants are implementing something, if they are not given clear demarcation lines… then they can sometimes act against what the Government’s intention should be,” Dr. Mitchell added.

In moving the motion before the Lower House, Prime Minister Dickon Mitchell explained that the policy measure of his 7-month old administration to increase taxes on the selective items is two-fold.

While it is geared to “assist the Government in paying for the many fiscal measures that will be implemented in 2023 to address the cost-of-living issues that are faced by our citizens,” the Grenadian leader said, “this will also assist the State with raising the much-needed revenue to address the significant health challenges that we face as a nation arising from the abuse of alcohol which in many cases leads to significant renal failure and the abuse of cigarettes which oftentimes leads to significant respiratory illnesses.”

According to Minister for Education, Youth, Sports and Culture, Senator David Andrew, statistics indicate that “alcohol is the leading cause of local hospital admissions.”

Minister Andrew informed the Upper House that “there are several other initiatives that don’t require being passed here (in Parliament) which will be engaged in by this administration.”

During the 2023 budget debate Opposition Senator Neilon Franklyn had expressed concern about the social ramifications of the increased tax on cigarettes and alcohol, contending that “people who are addicted to these goods, would not purchase less of it in response to the tax increase.”

“In fact, what would happen Madam President is that while their income remains fixed, and the cost of these goods go up, the disposable income for the household will be reduced,” he said.

The opposition Senator also expressed the view that the government should work towards breaking the addictive habits, through rehabilitation and education rather than ad hoc tax increases.

During last Friday’s sitting Sen. Franklyn implored the government side “to consider the social ramifications, and not just the health benefits or the economic outturn that may come with the policy measure”.

“I understand fully the intent behind it, and it is commendable that the government sees fit to move in the direction to implement some sort of measures to deal with alcohol and cigarette consumption on the island but the social ramifications need to be considered,” the Opposition Senator told the Upper House.

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