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Does Labour Love To Tax? - March 21, 2005

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Does Labour Love To Tax?


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


Government also reduced the cost of certain legal transactions. In 2001, Government reduced the Stamp Duty on Leases, Share Transfers and certain Banking Transactions.


Over the years, the Government has introduced a miscellaneous number of tax concessions to achieve specific objectives. Let us look at some of them:

  1. On several occasions we removed duties and Consumption Taxes on surveillance and security equipment for businesses and households.
  2. In 2003, the Government reduced excise duties for motor vehicles;
  3. In 1999, select power tools and equipment were exempted from duties and taxes;
  4. 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;
  5. To encourage persons to purchase shares in companies, we introduced a tax deduction in the year of purchase of shares;
  6. In 2001, we introduced for a period of three years, tax concessions for the purchase of solar water systems; and
  7. 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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