Stamp Tax: Injustice to Private Sector

Private Sector representative in the Upper House of Parliament, Senator Christopher De Allie has expressed reservations about the amendments being made to the Annual Stamp Tax by the ruling New National Party (NNP) administration.

Addressing a sitting of the Senate, De Allie said the private sector does not stand to benefit in any way from the Stamp Tax Amendment Bill that was brought to Parliament for passage.

The cash-strapped Keith Mitchell-led government has said that the amendment is being made to make the tax fall in conformity with the administration of the Valued Added Tax (VAT).

The tax creates a new section which requires registration of businesses to be done within a 30 day period after an operator commences business.

If the proprietor refuses to register the business within the stipulated time frame there will be a penalty of $250.

At the end of every year, businesses which have a turn over of $36,000 or more will be required to pay the annual stamp tax. This is a change from the $30,000 as it used to be.

Newly appointed Parliamentary Secretary in the Ministry of Youth, Sports and Religious Affairs, Senator Winston Garraway sought to convince fellow Senators on either side that the amended bill was badly needed.

He said: “This moving (of the) threshold from $30,000 to $36,000 for stamp tax purposes, it’s being in conjunction with what we have… the Value Added tax, where businesses have a turn over of $120,000 in a year – they are required to register for VAT and pay to Government what is due to Government”, he said.

“…What we have here is a more or less the same, from $120,000 to
$300,000 turn over within a year. So persons whose turn over is less than $300,000 would not be required to register for VAT… between $36,000 and $300,000, they will be required to pay annual stamp tax,” he added.

In speaking on the changes being made, Sen. DeAllie said he could not support the bill as it will not help the private sector.

“Annual stamp tax is a direct tax on business and on all transactions and what it does is effectively increase our population tax if you don’t know. So our population tax rate is 30%, by the time you apply the stamp tax on your pay and you work out effective taxes that are due to Government it goes up by 31-32%… so in effect what you are doing is increase our corporate tax rate across the board…it obviously means you want to put businesses under more pressure as it relates to tax”, he told the sitting.

“…The fact that you have said that you have moved the threshold and you have moved it to $300,000 or from 30 to 36… a $6,000 move in exemption for businesses – yes it will help small businesses (but) within thrty six (36) to 300,000, you have doubled it…so a business man who consistently makes over a million dollars, his expenditure is just doubled for stamp tax,” he said.

Sen. DeAllie noted that the Private Sector has bend over backwards to
accommodate the government of Prime Minister Mitchell with respect to changes being implemented as a result of the Structural Adjustment Programme (SAP) but cannot support the newlook annual stamp tax.

“When you look at all the moves put through by Government for Structural Adjustment Programme, the private sector supported these moves when we said that we will work with Government.

“Structural Adjustment has to be done and sacrifices have to be made…you are now asking us to move another level again for sacrifice, I cant understand the justification for this.

“We don’t see the need for this… if you are to increase compliance, we have constantly said to Government if we move compliance to a certain rate there will probably be no need to adjust the rate on stamp tax or to move it where we are moving it. As a matter of fact, we need to take out some of that.

“We could have discussions with the Ministry of Finance where you could probably lower the Corporate tax rate from 30% – now you saying you increasing my effective tax rate up from 30% to 30 plus.

Sen. De Allie received support on his opposition to the bill from Sen. Ray Roberts, the representative of the Labour Movement in the Upper House who said that this tax amendment was just another way for Government to make money.

“The first thing that (a) new business has to do and must be aware of is this bill, within 30 days, you have to find money to register. So clearly we (are) asking for money… the Government needs money, nothing is wrong with that.

“However, we in the workers movement we certainly extend our sympathy to those who have to find it. This amendment seems to be an attempt to
broaden the tax net and increase tax for revenue,” he remarked.

Sen. Roberts urged Government to consult with the Grenada Chamber of Industry and Commerce (GCIC) to arrive at a consensus on the issue because it will put more pressure on the private sector and that means jobs would be at stake.

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