Evans
Andrew Green, Staff Reporter
THE GOVERNMENT is to collect $20 billion in new taxes this year and not $13.8 billion as has been officially stated, according to economist Dr. Omri Evans.
Finance and Planning Minister, Dr. Omar Davies, told Parliament at the opening of the Budget presentation in April that an additional tax package was being imposed this financial year to cover a $13 billion financing gap. But Dr. Evans said taxes would rise by $20 billion instead.
"The measures will increase revenue inflows by approximately $13.8 billion," Dr. Davies said, after initially stating in his presentation that the aim of the tax increases was to collect revenue amounting to $13 billion. The measures outlined in a Ministry Paper presented in Parliament by Dr. Davies to accompany his budget speech also amounted to $13.8 billion.
Measures outlined in the Ministry Paper included a cess on imports, stamp duty adjustment, expansion of the General Consumption Tax (GCT) base, amendment to the Assets Tax, revision of motor vehicles duties, adjustments to the age limit of imported motor vehicles, an environmental levy, removal of tax credit for bonus shares, adjustments in motor vehicle duty concessions, and increase in Special Consumption Tax on alcoholic beverages.
But the sum of the measures Dr. Davies discussed in Parliament was $14.29 billion, based on the revenue yields he stated in his speech.
The $14.29 billion total excludes the adjustments Dr. Davies subsequently made to the GCT, shifting the burden from medicinal drugs and agriculture to gambling. This adjustment is expected to cost $1 billion but yield $2 billion, leading to a net gain of $1 billion.
However, Dr. Evans said "The new tax package is $20 billion by my calculation." This amounts to six per cent of the country's gross domestic product.
"Some taxes came into effect before the new financial year," Dr. Evans said. One example is the tax on cigarettes being used to support the National Health Fund. The tax was announced in March and, after becoming effective in April, is expected to yield $1 billion in the first year.
Outside of that $20 billion tax increase going to central Government, there will also be property tax considerations for local Government.
With these extra funds being withdrawn from the economy, the result will be a contraction in economic activity amounting to one to two per cent of GDP, the economist said. Given the nature of the taxes imposed, he said, "the contraction will affect especially manufacturing and distribution."
