Prime Minister and Minister for Finance Dr Keith Mitchell on Tuesday presented the country with a $933,932,530 million Budget of Revenue and Expenditure for 2014.
The overall budget is made up of Recurrent Revenue of $471.1 million, and Recurrent Expenditure of $487 million, and with the national debt pegged at EC$2.4 billion.
The budget was presented under the theme, “Building The New Economy Through Higher Productivity And Sacrifice For The Benefit Of All”.
Prime Minister Mitchell delivered the Budget before a large turnout of Grenadians especially supporters of his New National Party (NNP) at the Grenada Trade Centre in the south of the island.
He said the allocation made to the Ministry of Education and Human Resources is $110.2 million, the Ministry of Youth and Sports ($70.1 million), Ministry of Health ($67.2 million), Ministry of Finance and Energy ($57.3 million), Pensions and Gratuities ($51.4 million), and the Ministry of Works ($50.4 million).
Dr Mitchell announced that there will be a Deficit in the budget of $139.4 million, which will be financed from domestic and external sources.
It was disclosed that a loan authorisation bill is expected to be passed in Parliament within days to raise $140 million in financing to support implementation of the 2014 Budget.
As expected Dr Mitchell spelt out the austerity measures to be implemented by his ten-month old government as part of its so-called home-grown Structural Adjustment Programme (SAP) to deal with the financial and economic crisis facing the island.
With effect from January 2014, the Income Tax threshold will be lowered to $36,000 per annum from $60,000 per annum.
Persons who earn less than $3,000 per month will not pay any income tax. Persons who earn $3,001 to $5,000 per month will pay at the rate of 15%.
Persons who earn more than $5,000 per month will pay 15% on the portion of their salary between $3,001 and $5,000 and will continue to pay the existing rate of 30% on their salary above $5,000.
The Prime Minister told Parliament that government’s intention was to impose a threshold of $30,000, however, after strong representation by the Trades Union Council (TUC) especially the Grenada Union of Teachers (GUT), it was agreed to raise the threshold to $36,000.
The Washington-based International Monetary Fund (IMF) is said to have suggested to government to lower the threshold to $2000.00 per month in order to bring more persons into the tax net.
The fund has been pressing the Mitchell government to indicate how it intends to raise the funds that would be lost by putting the rate on persons earning $3000.00 per month.
IMF officials have told civil society groupings on the island that funds earmarked for Grenada would only be disbursed provided Grenada implements the fiscal measures it intends to put in place to arrest the problems affecting the economy.
Prime Minister Mitchell told Parliament that the lowering of the income tax on salaries is expected to yield an additional $14 million in revenue for government next year and bring an additional 4,000 persons into the tax net.
“As a consequence, Personal Income Tax is expected to yield $45.2 million in 2014”, he added.
The Grenadian leader announced massive increases in Property Tax on home owners.
From January 2014, the property tax rates will be increased as follows:
*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%.
Dr. Mitchell noted that the exemption of the first $100,000 on building values will be maintained.
In addition, owners of small parcels of land worth less than $20,000 will now pay a Minimum Tax of $40 instead of $20, and those with holdings worth less than $100,000, where the exemption applies, will now pay $60 instead of $30.
With this rate adjustment, the Prime Minister said Government expects to collect an additional $8.0 million in property tax next year.
According to Dr. Mitchell, Government will not be increasing 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.
The construction industry will be affected in 2014 as government has decided to restore the Standard VAT Rate on Selected Construction Material.
He told Parliament: During the past year, Government lowered the VAT rate to 5% on the following:
• roofing materials
• lumber and
• construction blocks.
At that time, we indicated that this special rate will be in effect for two years: 2013 and 2014. This measure has provided a boost to Construction but it has also impacted Government’s revenue.
On account of the need to boost revenue, Government has taken the decision to restore the normal rate of 15 percent from January 2014”.
The Prime Minister confirmed that Government will introduce a Tourism Marketing Levy of US$5 per night for each stay-over visitor.
He said the funds collected from the Levy will be used exclusively for marketing Grenada and will be collected by Government and channeled to the newly created Grenada Tourism Authority (GTA) for the sole purpose of marketing Grenada.
In the first year, this Levy is expected to yield $2 million.
On the issue of the Reduced Manufacturers Rebate, Prime Minister Mitchell said his administration is very mindful of the challenges of the manufacturing sector and will continue to support manufacturers under the new Manufacturers Competitiveness Programme (MCP).
However, he said the support will be reduced to a rebate of 5% instead of 10%.
The Prime Minister warned manufacturers that from 2014, they will not be allowed to accumulate additional credit balances but will have three years to liquidate their existing balances.
“It is projected that Government will save at least $1.5 million per year”, he said.
The Prime Minister announced in Parliament that those who play and win the lotto jackpot will now be taking home less as he intends to introduce a Withholding Tax on Lottery Winnings.
He said: “Winners of various jackpots including the games of the National Lotteries Authority will pay a withholding tax of 15 percent on their
Winnings. It should be noted that all slot machines and games of chance including those already in existence will need to be registered to operate in the State of Grenada. This measure is projected to yield an additional $2 million next year”.
Nationals would also be subjected to Increased User Fees for government services in 2014.
The Prime Minister stated that there are some user fees and licenses that have not been revised for several years and Government has decided to revise fees “to better reflect the cost of these services”.
In this regard, he said that umbrella legislation will be taken early in the New Year to Parliament to adjust fees for selected services.
The Grenadian leader made a detailed statement to Parliament on the controversial Citizenship by Investment Programme, which involves the selling of Grenadian passports as a revenue earning measure.
Noting that in September, Government passed the requisite legislation to enable the launch of the programme, he said that a Citizenship By Investment Committee was appointed and is headed by an independent professional from the private sector.
According to Dr. Mitchell: This Committee will review all applications from the approved agents and make final recommendations to Cabinet. This Committee will also be the body, which reviews applications for investments under the National Transformation Fund.
Cabinet has also published an initial list of approved projects and investments. Once the due diligence checks are completed, interested persons can invest in any of these following priority areas:
• Health, Wellness and Education Services
• Green/Renewable Energy
• Hotel Development
• Information Communications Technology (including Call Centres)
In terms of specific projects, Cabinet has endorsed an initial list of approved projects.
• New Hospital
• West India Spices
• Port Louis Development
• Mt. Hartman and Hog Island Hotel Resort
• St. David Town Centre Development
An investor is required to invest at least US$500,000 in an approved project or investment. Government will receive US$50,000 out of this sum.
The remaining US$450,000 will go into the approved project or investment. Alternatively, an investor can elect to contribute directly to the National Transformation Fund.
Subject to due diligence, an investor will pay $75,000 at the time of application and will be eligible to become a permanent resident.
One year later, such an investor will pay an additional $125,000 if the application for citizenship is approved thereby bringing his total payment to $200,000.
Government will receive US$25,000 on each payment made by the investor. The remaining US$150,000 will be deposited in the National Transformation Fund in two tranches of $100,000 and $50,000 respectively.
Additional details on the operations of the National Transformation Fund can be found in Annex XI of this Statement.
To date, Cabinet has approved the appointment of two agents under this Citizenship By Investment Programme – United States Regional Economic Development Authority (USREDA) and Savvy Grenada.
We expect the programme to be fully operational from January of next year.
In discussions with the IMF, it has been agreed that for the purpose of revenue targets, the proceeds of this Programme will not be classified as Non-Tax Revenue but as financing for capital expenditure.
This is a conservative approach to revenue projections and target setting but also ensures proceeds are earmarked for development projects, which can boost growth and job creation.
Mr. Speaker, it is projected that Grenada will realize about EC$30million from this Programme next year”.