Increased tax on sugary, alcoholic, and tobacco products delayed

by Linda Straker

• One–month delay in implementing Excise Tax and VAT increases
• Excise Tax increase is Government’s way of recouping revenue
• Additional time needed to avoid ambiguity on identified products

Prime Minister Dickon Mitchell has announced a one–month delay in implementing an increase in the Excise Tax on alcohol and tobacco products and Value Added Tax (VAT) on sugar, sugary and carbonated drinks.

In his budget statement on 5 December 2022, the Prime Minister announced as of 1 February alcohol and tobacco products will see an increase in the excise tax. Refined sugar will be removed from the zero rates VAT list, and the VAT on sugary products will increase to 20%.

“In relation to the tax on the sugary drinks, we are going to push back the date for this to become effective from the 1 March rather than 1 February because we need the additional time to make sure that the items are clearly identified, clearly classified and clearly published and that there is no ambiguity,” said Mitchell who is also the Minister for Finance.

In the first post-cabinet briefing for 2022, he said that his Government wanted to have more discussions with the stakeholders who will be directly affected. “We felt we needed that additional time to do so and to communicate with the stakeholders who will be impacted by this measure,” he said.

Providing more justification for the delay of the Excise Tax implementation, Prime Minister Mitchell, who presented a resolution for the increase to the Parliament last Friday, said that the delay for enforcement is to identify the list of products that will be affected.

“As it relates to the Excise Tax on alcohol and cigarettes, we are also going to push the date back to 1 March so that we can clearly identify all of the alcoholic items. The fact that the Excise Tax Act was passed a long time ago and what you called tobacco when it was passed, is not necessarily what you may call tobacco today,” he said.

“There are new products, for example, e-cigarettes and so on which are now on the market, and we need to make sure that we address those nuisances as part of the process. So, we need the additional time to address it and so we will push the date back to 1 March,” he said.

The Excise Tax increase is the Government’s way of recouping revenue given up through its cost–of–living relief measures. When he delivered the 2023 budget statement, Prime Minister Mitchell announced that Government will lose as much as EC$30 million.

“Given the significant potential loss of revenue by the fiscal measures implemented by this Government, this is just one of the many counteracting measures that the Government has taken from our fiscal policy to address this,” Prime Minister Mitchell told the Lower House of Parliament when he presented the resolution to amend the Excise Tax Act.