The Government of Grenada has taken the decision to increase the Value Added Tax (VAT) threshold from EC$120, 000 to $300, 000 with the aim of providing greater incentives for the expansion of small businesses on the island.
This is one of several new measures to be introduced with the passing of the Value Added Tax (Amendment) Bill, 2015, tabled in the Lower House of Parliament last week Friday.
The Bill also proposes a reduction in the late fee for filing VAT returns from EC$10, 000 to either 5% plus 1% for each month thereafter or whichever is greater.
Health Minister Nicholas Steele, who introduced the Bill to the House for first reading, said it presents a more realistic measure of equity to taxpayers, and provides more breathing space for the small businessman.
Five other money bills were piloted during last Friday’s sitting proposing to significantly restrict certain powers from the Minister of Finance for the first time in the history of Grenada’s Parliament.
They are the Annual Stamp Tax (Amendment) Bill, 2015; Property Transfer Tax (Amendment) Bill, 2015; Income Tax (Amendment) Bill, 2015; Public Debt Management Bill, 2015; and the Fiscal Responsibility Bill, 2015.
The Annual Stamp Tax (Amendment) Bill, was passed with amendment and proposes an increased threshold from EC$30, 000 to EC$36, 000 targeting small businesses.
“We have to ensure that small businesses grow…to ensure that small businesses make their contribution,” said Trade Minister, Oliver Joseph who introduced the Bill to the House.
Prime Minister and Minister of Finance, Dr. Keith Mitchell strongly supported the Bill reiterating that this move is an “attempt to provide avenues for “people with innovation to take more risks.”
“We believe that we should keep the rate at its minimum, and that is what we are doing here today,” Dr Mitchell added.
This newspaper understands that more than 60 small businesses throughout the island have closed their doors since the Mitchell-led New National Party (NNP) administration came into office in February 2013.
Meanwhile, the Property Transfer Tax (Amendment) Bill, 2015, which was passed without amendment, seeks to clarify ambiguity involved with the transfer of lands.
Steele said the amendment proposes a regularized procedure for foreign investors on what they need to do, as well as set a time schedule for investors to make their investment a reality.
It stipulates that where a purchaser who is not a citizen is allowed a rate of tax of 5% for exclusive use in carrying out a project, if the project is not commenced within two years of acquisition, the property tax waived shall be repaid to the Comptroller.
Contributing to the debate on the Bill, Prime Minister Mitchell noted that “in the past, governments would have given concessions without insisting in the agreement that if they (the investor) didn’t perform they would be fined.”
The Bill also seeks to remove powers from the Minister of Finance to remit tax, which Dr Mitchell said “speaks volumes of the intention of this government to ensure that politicians don’t take advantage…”
The Income Tax (Amendment) Bill was passed and seeks to provide several incentive regimes and a more predictable path for the granting of investment incentives.
According to Education Minister Anthony Boatswain, who piloted the Bill, it is expected that it would be the “primary vehicle for which concessions are granted.”
It also restricts in a significant manner the powers of the Minister of Finance, he added.
“In all my years …I have never seen any bill brought to Parliament restricting the powers of the Minister of Finance”, Boatswain told the lower house sitting.
In giving support to the bill, Prime Minister Mitchell noted that the change “brings an air of certainty in the process of granting concessions”.
“It’s a win-win situation for all concerned,” he remarked.
Speculation is rife that officials from the Washington-based International Monetary Fund (IMF) pressured the two year old administration to insert the clause to effectively reduce on some of the discretionary powers of the Minister of Finance on the issue of concessions.
The fund has been overlooking the Structural Adjustment Programme (SAP) which the Mitchell-led regime has been forced to enter into in order to deal with a severe fiscal situation facing the country and the need to address a massive national debt of EC$2.6 billion.
Additionally, the Fiscal Responsibility Bill seeks to introduce a rules-based fiscal policy framework, establish accompanying risk management systems and promote transparency in the management of the financial operations of the Government to ensure progressive minimisation of debt obligations.
This bill calls for the establishment of a fiscal responsibility framework and for prescription of targets to ensure progressive minimisation of financial obligations, among others.
It is expected that all six bills will be approved and passed into law during Friday’s sitting of the Upper House (Senate).