TAX BURDEN SHIFTS PIT OUT, RRC UP

The abolition of Personal Income Tax (PIT) and contrasting increase in the Revenue Recovery Charge (RRC) from 10 to 13 per cent, is set to see a shift in the burden on taxpayers in the coming months.

Prime Minister Gaston Browne in delivering the 2016 Budget Speech, on Thursday, announced that PIT will be scrapped by April, but other measures will be taken to make up for the near $40 million in lost revenue. Twenty million of that is expected to come from the RRC increase while the difference is expected to be made up by other tax reforms.

Browne asserted the change will be positive.

“Abolishing Personal Income Tax will increase individual disposable income, not only for consumption but investment, and this is one of the necessary steps for mass wealth creation and income redistribution,” he said.

The direct beneficiaries of the removal of PIT will be limited to the less than 40 per cent of the working population that Browne said earns more than EC $3,000 per month as the PIT threshold is set at $3,500.

Further, the biggest winners of the PIT will be the less than 8 per cent of employees that Browne said earns more than EC $5,000 per month.

“Regressive taxation, must be considered in the context of the entire tax ecosystem; transfer payments and welfare support provided by government, including socialised health care, education and subsidised services” the prime minister argued, adding “When all these measures are taken into account, higher income earners do pay the most taxes in Antigua and Barbuda.”

The other measures he announced that will increase tax revenue are: the creation of a Revenue Court, adjusting corporation and business legislation to close loopholes on corporate tax avoidance; the introduction of an Unincorporated Business Tax Act; and a security bond mechanism to clamp down on the smuggling of alcohol and tobacco products.

The Political Leader of the United Progressive Party (UPP) Harold Lovell, who is a former finance minister, said the increase in the RRC was unacceptable because, “…by increasing the RRC, that means they are going to increase the cost of living, they are going to put the burden of the additional revenue on the backs of poor people, and that is not fair,” Lovell said.

“We say that is a regressive form of taxation rather than a progressive form of taxation.”