Proposed tax amnesty for 2023 comes under scrutinyThe decision of the 5-month-old Congress administration of Prime Minister Dickon Mitchell to allow for a tax amnesty for one (1) year as it seeks to recover more than EC$600 million in arrears is receiving mixed reviews as its legality comes into question and views expressed that a distinction should have been made, especially concerning the Value Added Tax (VAT).
VAT is a 15% broad-based government tax added to the cost of goods and services that is passed onto consumers, and collected by businesses across the island, with annual taxable supplies over $300,000.00, while a rate of 10% VAT is applied on hotel accommodation and dive operations, which are then required to pay the amount collected to the Inland Revenue Department (IRD), monthly.
Delivering his maiden national budget of EC$1.3 billion, Prime Minister and Finance Minister Dickon Mitchell announced that effective January 2023, his administration, which came to power following the June 23 general election will implement a tax amnesty for the next 12 months that will waive 100 % of all interest and penalties for all arrears backtracking to December 2021.
However, he warned that in order “to halt the further accumulation of arrears, all arrears for 2022 onwards will be strictly enforced pursuant to the Tax Administration Act, including the requirement of tax clearance certificates to travel, to access loans from financial institutions, garnishees, et cetera.”
According to the Prime Minister the Inland Revenue Department (IRD) within the Ministry of Finance will be allowed to act “without political interference from government contrary to what happened in the past.”
Former Opposition leader Tobias Clement has questioned the legality of the move by the new administration in St. George’s to grant a tax amnesty on monies owing to the State.
“Is it a legal thing for the government to just give an institution amnesty on monies that they have collected on behalf of Grenada, but refused to pay or have spent it otherwise?“ contended Clement who shared his view on this aspect of the 2023 budget on The Bubb Report last Sunday.
“There should be no amnesty there,” added former Minister for Economic Development Oliver Joseph, who also appeared as a guest on the programme, adding that “a distinction should have been made with respect to Value Added Tax because of the very nature of it and the way it is paid in (to the treasury).”
Private Sector representative in the Upper House of Parliament, Senator Salim Rahaman welcomed the tax amnesty, and spoke to reporters on its significance to the business community, especially those that are struggling.
“This is of particular importance to the business community, and Grenadians as a whole. Debt forgiveness gives them an opportunity to start on a new page,” said Sen. Rahaman.
“We want people to pay the taxes but we also want the taxes also to be easy to pay. So, for example, the tax amnesty will be for 12 months, and there will be a removal of the interest and the penalties, and we see, for example, a taxpayer for whatever reason may not have paid the taxes as they should be, and the interest component of it especially, is very burdensome because it does not give them the opportunity to recover because it has interest now upon the debt, and to forgive that it’s a new gesture,” he added.
Former manager of the Grenada Ports Authority (GPA) Ambrose Phillip also commented on the tax amnesty debate and expressed the view that over the years governments have taken a “soft approach with the issue of properties,” noting that “our governments have not been prepared to do what it ought to have done (which is) when people owe you, you can seize the property and sell it.”
“They don’t want to enforce it through the court but it can be done (and) once you seize one property you will be surprised how many of them come and pay up…Governments have not been prepared to do that and therefore, tax amnesties would always come up,” said Phillip.
The former GPA boss is of the view that “properties (property tax) is one of the biggest areas in which there can be a tremendous increase in revenues.”
Phillip also suggested that the government, which announced plans to conduct a re-evaluation of properties in the coming year should “link property taxation to the insured values,” noting that “what people are paying for property tax is (only) a fraction of what people’s properties are insured for.”
“I hold the view that in respect to properties, this is one of the big areas in which they can see a tremendous increase in revenues…I believe it should be a second if not, the first large area of income apart from operation taxes, and stuff like that given that personal income tax is almost negligible…“ I believe we are taking a soft approach to this matter of properties,” he remarked.
Prime Minister Dickon Mitchell has affirmed that his ruling National Democratic Congress (NDC) regime “will take steps to improve the administration and collection of existing taxes, and over time simplify and reduce the number of taxes.”
He disclosed that in order to transition into the new tax system, the IRD will undertake a mass revaluation of properties in 2023.
“The new property values will be implemented in 2024. It is important to note that the revaluation of properties does not necessarily mean higher property taxes, as the minister can vary current rates to achieve revenue neutrality,” PM Mitchell told Parliament.
“The revaluation exercise will allow the government to implement a more progressive property tax system, however, to improve compliance in this area, the IRD will implement a pilot that will allow public officers to pay their property taxes through monthly deductions,” he said.
Additionally, PM Mitchell said this service will also be extended to private sector firms, as the initiative will reduce the burden of having to find all the resources at one point in time when the tax deadline comes around.