As of January 2014, Grenadians earning in excess of EC$3,000 per month will have to pay 15% income tax, and Government will also implement new tax measures as it seeks to put structures in place to increase Government’s revenue.
The measure is part of the homegrown programme structural adjustment programme which will run from 2014 to 2016. At present only earnings in excess of EC$60,000 are liable to 30% income tax. The new tax threshold will be EC$36,000 per year.
“Government will also reduce the income tax rate by half, to 15% for persons earning less than $60,000 per year. The rate of 30% will remain for persons earning more than $60,000 per year,” said Prime Minister Dr Keith Mitchell in an address to the Nation on Wednesday night.
He explained that as the Head of Government he decided to make the announcement at the end of October to give persons time to prepare for the coming change. He said that Government is very mindful that the lowering of the income tax threshold will affect some persons who have obligations with financial institutions and other personal needs, and called on local banks to be sensitive to the situation of those who will be affected.
“The banks have assured Government that it will work with its customers where necessary. I hereby make a similar appeal to our credit unions,” he said, while pointing out the Government is very concerned about job layoffs at this time.
“I hereby make a special appeal to all employers, especially in the private sector, to exercise restraint in this very difficult period. Retrenchment must be a last resort. We ask that you make a special effort to avoid further layoffs at this time,” he said as he called on labour unions to exercise restraint in respect of wage demands in government and in the private sector.
He also announced in his 30 minute address which was aired via radio, television, and live Internet streaming, that there will also be some adjustment to property taxes. At present, Grenada has one of the lowest rates of property tax in the Caribbean.
“No country can run without taxes. No Government can provide services without taxes. Throughout our consultations over the past few weeks, there have been consistent calls for Government to ensure that everyone pays their fair share.”
“As a consequence, there will be new policies to deal with persons who are not paying their fair share of taxes. Already, Inland Revenue has identified the top 100 tax delinquents, and they are being pursued for their taxes owed to the State. This is not simply a fiscal issue — it is a moral issue,” he said.
The Prime Minister, who is also the Minister of Finance, told the nation that the Inland Revenue Division will also be strengthened through a combination of advisers from friendly countries, new policies and outsourcing.
He also said that during the next few weeks there will be further consultations as Government seek to build consensus, and broaden support for the homegrown programme. The “Letter of Intent” for the programme facilitated by the IMF, will then be signed at the end of November.
“Sisters and brothers, there will be some pain for all, but there will also be many benefits for all,” he stated, while explaining that Government’s proactive approach to designing a homegrown programme, with several agencies including the International Monetary Fund, the World Bank, the Caribbean Development Bank, the Eastern Caribbean Central Bank, the European Union and Britain, having already pledged financial and technical support.
The World Bank was in Grenada to prepare a US$30 million support package while Grenada expected to receive at least US$100 million in soft loans and grants to support the home-grown programme.
“These funds will enable Government to offer more assistance in areas such as soft loans for small businesses, house repair and expansion, skills training for our youth and more support for our farmers, [and] for the tourism sector, among other initiatives,” he said.
In respect of the Public Debt, Government is proceeding with the debt restructuring which will result in significant debt relief for Grenada. This relief will allow Government to invest more in our people and invest more in the productive sectors; thereby boosting economic growth and job creation.
In addition, there will be technical support for the Ministry of Finance especially in tax administration, planning and macro-economic advice. “This is a time of shared sacrifice. However, as Grenada’s economy gets stronger, there will be a time of shared benefits from the fruits of the recovery,” he promised.
