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Does Labour Love To Tax?
INTRODUCTION: POLITICS AND FACTS
Henry Adams, the famous American author, historian and politician, once remarked
that “Practical Politics consists in ignoring facts.”
It is always easy – oh, so easy – to disown facts in public debate and discourse
and turn to emotion. People relate to emotion, not to hard facts. Listening to
facts can be boring. Besides, facts have a way of challenging what people
believe and few like to be exposed. It is far easier to build arguments on
emotion and so-called perceptions. Of course, there are those who deliberately
seek to shape public opinion by manipulating factual information, then to
gleefully pronounce their opinions as facts. “Politics is about perception” is
the term in vogue these days.
Life can be strange, sometimes. A Government introduces one tax measure, and
immediately it is characterised as a Government that loves to tax. All the other
measures to reform or ease the tax burden are forgotten.
Instinctively, most of us hate taxes -- especially as it comes from our
hard-earned incomes. There is no government activity that brings as much dislike
as taxation. It is little wonder, then, that tax avoidance and tax evasion are
so rife and rampant. And precisely because so many citizens hate to pay taxes,
opposition politicians thrive on attacking governments over taxation. “All this
government does is to raise taxes”, is the loud and frequent allegation. “Taxes
and more taxes,” they say.
But is all of this really true? Let us draw up the balance sheet on the
government’s Tax Record and see what it yields.
NO MORE INCOME TAX FOR 5,500 WORKERS
The most dramatic changes in taxation occurred in 2001 when the government
legislated increases in Personal Allowances. Prior to 2001, a taxpayer could
claim a Personal Allowance of $10,000.00. Thus, anyone who had an income of
$10,000.00 or more faced the prospect of taxation. Since 2003, all taxpayers are
entitled to a Personal Allowance of E.C. $16,000.00 -- an increase over the 1997
figure of 60%. As a result of these changes, approximately five thousand, five
hundred (5,500) workers no longer pay income tax. Every other taxpayer enjoys an
increase in their disposable income, because they can now claim the Personal
Allowance of $16,000.
REDUCTION IN CORPORATE TAX
But it is not just ordinary taxpayers who have benefitted from reduced income
tax. Business places now enjoy a lower Corporate Tax Rate. In 1997, companies
paid a Corporate Tax Rate of 33 1/3% on their profits. Since 2002, that rate has
been declining, and since 2005 the Corporate Tax Rate is now 30%. The fact is,
Saint Lucian companies enjoy one of the lowest Corporate Tax Rates in the
Commonwealth Caribbean.
PROPERTY TAX REDUCTIONS
Remember all the talk about Property Tax? Some of it was brought on by the
current ongoing survey of homes and property to properly determine the liability
of homeowners for the payment of Property Tax. You would think that this
Government introduced Property Tax to St. Lucia. We did not. What we have done
is to reduce payments of Property Taxes of homeowners and businesses.
In respect of private house owners, this government inherited Property Tax rates
of 7%, 8% and 14%, respectively, of the assessed rental value of the property.
In 2001, this Government introduced a single, uniform rate of 5%.
In the case of commercial properties, the Government introduced a rate of 0.25%
tax on the open market value of the property. This approach has yielded
significant reductions in Property Tax on commercial properties.
But we went four steps further.
First, we exempted pensioners -- that is, persons who have reached the
pensionable age under the National Insurance Act, No. 18 of 2001 -- from the
payment of Property Tax.
Secondly, we exempted in some cases, and reduced in other cases for a period of
three years, a first-time home-owner from the payment of Property Tax. This
measure was intended to ease first-time home-owners because we knew that the
first few months after building a new home are the toughest.
Thirdly, we exempted from the payment of Property Tax, any owner of property
whose household income is less than $6,000.00 per annum. In other words, if your
household income is less than $500 per month, then you do not pay Property Tax.
The fact is, under this Government, poor people have been given a break from the
payment of Property Tax.
Fourthly, we exempted from the payment of Property Tax for a period of three (3)
years, any commercial property completed after April, 2001. Again, this measure
was intended to help businessmen who invested in new commercial property.
None of these Property Tax concessions existed prior to 1997.
HOMEOWNERSHIP SAVINGS PLAN
Then, in order to assist young people to invest in their own homes, the
Government introduced a Registered Home Ownership Savings Plan. If an individual
makes payments under a Registered Home Ownership Plan in any Bank, Credit Union
or Building Society, a deduction from Income Tax for such payments up to a
maximum of six thousand dollars per year, for a period of five years, is
allowable. Check it out at the Bank of Saint Lucia, if you doubt me. But doubt
or no doubt, young Saint Lucians, especially public officers, need to make use
of this opportunity.
ABOLITION OF TAX ON GRATUITY AND TIPS
One of the first acts of this Government was to abolish taxes on gratuities and
tips to hotel workers. It was our way of saying “thank you” to hotel workers for
their contributions to the Tourism Industry. Today, no hotel worker is taxed on
tips.
EMPLOYMENT TAX CREDIT
In 1998, by Act No. 11 of 1998, we introduced an Employment Tax Credit to
companies which employed graduates from Universities. This tax credit allows
companies to claim as a deduction, the salary of the employed graduate, plus an
additional amount of 25% of the total salary paid during the income year, for a
maximum period of three years. The simple objective of this measure was to
encourage businesses, especially family-owned businesses, to employ university
graduates to strengthen the management of their companies.
INTEREST ON REFUNDS
By the same Act (No. 11 of 1998), we introduced the system of interest payments
on delayed tax refunds. This was never in existence.
In the past, the Government would owe tax payers hundreds of dollars, and delay
payments without the slightest concern. This too has changed. Where refund of
tax is not paid six months after the date of assessment, the refund attracts
interest at the rate of four percent per year.
TAX INCENTIVES FOR NEW SMALL BUSINESSES
In 1998 too, this Government introduced a new and reduced tax regime of
Corporate Tax for new, small businesses. All small businesses used to pay a rate
of 33.3%. Since 1998, the rates for new small business enterprises are as
follows:
(i) for the first income year 15%
(ii) for the second income year 25%
(iii) for the third income year 25%
(iv) for the fourth income year 30%
(v) for the fifth and subsequent
income years 33 1/3%
Of course, the rate of 33 1/3 % in the 5th year no longer applies, since overall
Corporate Tax has been reduced to 30%. The objective here was to lend a hand to
new small businesses in their early years of existence.
STUDENT LOAN INTEREST ALLOWANCE
I have heard it said that we do not support students. The truth is, in order to
assist students who have borrowed to pay their university education, this
Government introduced a loan interest allowance. An individual is entitled to a
deduction of a maximum of three thousand dollars in respect of any amount during
the year of income by way of interest on money borrowed to finance tertiary
education. No such support existed for students prior to 1997.
ABOLITION OF EXIT CERTIFICATE
Incidentally, how many of you remember that prior to 1997 Saint Lucians could
not travel overseas freely? Have you forgotten? Unless you had an Exit Tax
Certificate from the Inland Revenue Department – and for which you had to pay --
you simply could not travel. This Government abolished the requirement for an
Exit Tax Certificate. Now, every citizen can travel in and out of Saint Lucia
without hindrance.
ABOLITION OF ENTERTAINMENT TAX
Are you also willing to recall that prior to 1999, entertainers were required to
pay tax on proceeds from dances, shows or other entertainment? Remember when
armed policemen and Inland Revenue officers stood outside dances to ensure taxes
were collected on each ticket sold? This Government abolished that tax. Again if
you have doubts, then see the Entertainments Duty (Repeal) Act, No. 18 of 1999.
INCREASE IN TAX DEDUCTION FOR SAVINGS IN CO-OPS.
In that same year too, the Government increased the tax deduction for savings in
Credit Unions. The deductions were increased from $3,600.00 to $5,000 and made
effective from 2003.
REDUCTION OF STAMP DUTIES
Government also reduced the cost of certain legal transactions. In 2001,
Government reduced the Stamp Duty on Leases, Share Transfers and certain Banking
Transactions.
MISCELLANEOUS TAX CONCESSIONS
Over the years, the Government has introduced a miscellaneous number of tax
concessions to achieve specific objectives. Let us look at some of them:
- On several occasions we removed duties and Consumption Taxes on
surveillance and security equipment for businesses and households.
- In 2003, the Government reduced excise duties for motor vehicles;
- In 1999, select power tools and equipment were exempted from duties and
taxes;
- On more than one occasion, Government announced incentives by way of
exemptions on taxes for materials to businesses to modernize and refurbish
business places in the city;
- To encourage persons to purchase shares in companies, we introduced a
tax deduction in the year of purchase of shares;
- In 2001, we introduced for a period of three years, tax concessions for
the purchase of solar water systems; and
- In 2002, we removed Import Duty and Consumption Tax on CD Roms and Hard
Drives.
Now, you tell me, is this a Government with a heart of stone, interested only
in taxes? I can predict your reply. You are going to say “Okay, you have told us
about the concessions and tax-reducing measures. That is one side of the balance
sheet. What about the new taxes you introduced, for example, the Environmental
Protection Levy?” I’ll take on that issue next week.
Until then, take your time and reflect on what I have said. Let us transform our
politics by arguing and debating facts.
Take care, and God Bless.
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