A return to the selling of Grenadian passports under a renamed programme called “Citizenship by Investment”, will be one of the major planks of the Keith Mitchell government in St. George’s to raise badly needed cash.
A previous Mitchell-led New National Party (NNP) government disbanded the controversial programme after radical terrorists brought down the Twin Towers including the Empire State building in a strike in New York in September 2001.
The move to disband the programme came amidst fears that the Grenadian passports could fall into the wrong hands.
But Prime Minister Mitchell is promising a much tighter and strictly control programme involving the sale of passports that can bring in EC$27 million in revenue for the island.
Dr. Mitchell outlined the following revenue enhancement measures for fiscal 2013:
Government recognizes that raising tax rates in a depressed economic situation is not smart economics. That said, Government is fully committed to finding creative ways to improve revenue to help fund some of the investments needed to build the New Economy.
The following revenue enhancement measures will be implemented in 2013:
Citizenship by Investment Programme
Within the next two months, Government will bring legislation to Parliament to establish a Citizenship By Investment Programme.
Such programmes have been in existence for many years in both developed and developing countries. Grenada will design a Programme tailored to Grenada’s needs and will take great care to attract clean and credible investors. This Programme is expected to start in June 2013.
Cabinet has appointed a Committee led by the Attorney General to receive and determine applications under this Programme. Government has placed a very conservative revenue estimate of $27 million from this Programme.
New User Fees Government will increase selected licence fees, including Gun Licences and the introduction of signature license plates. Strengthening the Administration and
Collections of Taxes
Mr. Speaker, during our budget consultations with Trades Union Council and the Business community, the issue of revenue leakage at both Customs and Inland Revenue has been raised.
Our Government shares those concerns and will act to improve collections. More on this will be said in due course.
Through administrative reforms at the Customs and Inland Revenue Departments and tighter management of ad hoc concessions, Government intends to raise approximately $9.0 million.
BUILDING THE NEW ECONOMY
Imperatives of the New Economy
Mr. Speaker, the top priority of our Government is building of the New Economy. The New Economy must provide jobs for those who wish to work; business opportunities for those who choose to invest; opportunity for wealth creation and prosperity for those prepared to sacrifice and play by the rules; and social justice for all who believe in equality and human rights.
Improving The Investment Climate
Consistent with our stated intent to practice an enlightened foreign policy that puts people not ideology at the centre, Government will initiate and pursue investment treaties with several countries including Qatar, Brazil, Russia, India and China.
Moreover, we expect the Citizenship By Investment Programme will attract foreign direct investment to Grenada thereby creating much-needed jobs.
Improving the VAT System
Mr. Speaker, the New National Party gave a commitment in its manifesto to review the VAT system. This review has commenced. In this regard, the biggest concern raised by the private sector is that the current VAT regime discriminates against local purchases such that when a concession is granted and the VAT is waived on imports, you cannot use that concession to get a VAT waiver on the same item, if purchased locally. Obviously, this discourages domestic economic activity and hurts job creation.
Our Government has heard the loud cries of the private sector on this vexing issue and has agreed that it would be best for economic activity and growth, if Government allows VAT concessions to be enjoyed equally when the product is sourced locally as when it is imported.
Accordingly, we will soon pass the necessary amendments to the VAT Act.
Mindful of the concerns raised by the private sector about voluntary registration, Government will mandate the Inland Revenue Department to develop guidelines and the necessary regulations to give effect to voluntary registration for VAT by small businesses from January 2014.
Government will also amend the VAT Act to exempt construction services associated with repairs and expansions to residential accommodation.
Mr. Speaker the downturn in construction has played havoc on our people who are employed by and benefit from this sector.
In addition to the various public sector projects that I have just announced, Government will provide further stimulus to the construction sector by reducing the VAT on the following items to 5% with effect from the 1st, May, 2013 to December 31, 2014:
• roofing materials
• lumber and
• construction blocks.
Further, Mr. Speaker Government will forego VAT on construction services for projects valued at less than EC$400,000.00 over this same period.
Mr. Speaker on the matter of the high price of sand, this Administration is engaged in efforts to reduce its cost from approximately EC$120.00 per load to no more than EC$60.00 per load, a 50% reduction, in an attempt to drive down the cost of construction and home ownership.
Our commitment is to deliver a meaningful reduction in the cost of construction and to stimulate construction employment and economic activity.
To achieve this objective, greater efficiency will be required throughout the regulatory systems.
In this regard, Government will modernise the Physical Planning Division to ensure efficient and timely approval of physical development plans, essential for the revival of the construction sector.
Mr. Speaker, our several consultations, across the major stakeholder Groups urged support by the commercial banking sector and the credit unions.
In a free market, such as ours the action of Governments on Banks and financial institutions is limited largely to moral suasion.
We call on the banks to assist us in making this construction stimulus package a success, by doing whatever it can to offer facilities which encourage new mortgages.
Mr. Speaker, our Government also intends to stimulate construction activity by eliminating the Alien Landholding License requirement for CARICOM Nationals.
We will endeavour to deliver a 30-day timeframe for decisions on applications for Alien Land holding licenses to non-CARICOM nationals.
Mr. Speaker, the manufacturing sector accounts for 6% of Grenada’s Gross Domestic Product (GDP); employs 4.5% of the employed labour force and contributes nearly 60% of total domestic exports.
This sector comprises small to medium size businesses with linkages to agriculture, construction, tourism, and other productive sectors.
After presenting proposals to the previous Administration and pleading for a review of the VAT rebate mechanism for the past 18 months, our Government has heard the cries of our manufacturers.
Effective May 01, 2013, Government will replace the Manufacturers Rebate with the Manufacturers Competitiveness Programme (MCP) as follows:
(1). The MCP will be composed of two (2) parts.
(2). Part A is equivalent to 5% of sales (VAT exclusive) for qualified manufacturers.
(3). Part B is equivalent to 5% of sales (VAT exclusive) and can ONLY be used against accumulated rebate balances.
(4). The Part “B” amount will be subject to a “sudden death” provision in the sense that once the accumulated rebate balances are liquidated, the Part “B” component will cease and the beneficiary firm will only continue to benefit from the Part “A” provision.
(5). The MCP will extend for a period of four years, with annual reviews to ensure conformity with the criteria. These criteria are: Employment; Investment; and Tax Compliance.
Mr. Speaker, we believe this decision will preserve our manufacturing jobs and create additional jobs from this sector over the next two years.