Increased VAT and Excise Tax go into effect

by Linda Straker

• 15% withholding tax on games of chance winnings from 1 March
• Higher VAT and Excise Tax on refined sugar, carbonated drinks, tobacco and alcoholic products from 1 March

Refined sugar, carbonated drinks, tobacco and alcoholic products are set to be charged at a higher rate for Value Added Tax (VAT) and Excise Tax as of 1 March 2023. 

Prime Minister Dickon Mitchell, on 24 January 2023, announced a 1-month delay in the enforcement of an increase in the Excise Tax on alcoholic and tobacco products as well as Value Added Tax on sugar, sugary or carbonated drinks.

Refined sugar will be removed from the zero rates VAT list, and the VAT on sugary products will increase to 20%. The Excise Act will increase both the wholesale and retail price of most alcohol products, including beer, wine, whisky, rum, brandy, vodka, gin and liqueur, as well as all tobacco and tobacco substitute products such as cigars, cheroots and cigarettes. Tobacco products will see the Excise Tax moving from 105% to 200%, while the excise tax on alcohol will move from $1.10 and $4.40 per litre to $1.50 and $5.00 per litre, respectively.

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 while refined sugar will be removed from the zero rates VAT list and the VAT on sugary products will increase to 20%.

However, a news conference on 24 January announced that his Government had set 1 March as the new date. “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,” he said in January.

PM Mitchell, also Minister for Finance, 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.

He also explained that the delay is also 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 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 at much as EC$30 million. 1 March is also the enforcement date for a 15% withholding tax on winnings from lotteries and all games of chance.