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Exempted From Development
By Kieron Murdoch | Opinion Contributor
If Antigua and Barbuda, and other small island development nations in the Caribbean are serious about increasing the pace of their development, there needs to be a new approach to the issue of how and when tax waivers and tax exemptions are granted in all categories.
At the moment, the Prime Minister is once again on the weekend airwaves taking the Sandals Antigua to task over various issues, one of which he reports surrounds exemptions which the business enjoys. It was reported that the hotel has taken a tax issue to court for determination.
It is not uncommon for the government and Sandals to get into the occasional spat. Who could forget the debacle in June 2016 between Sandals and the government over taxes. Putting that aside, there is a broader issue which warrants discussion everytime these spats occur, and that is the granting and administration tax exemptions. The issue goes far beyond Sandals.
Tax exemptions are a double edged sword. They are legitimate policy actions used by governments to attract foreign investment or local investment, or to provide relief to any business or applicant who may warrant it depending on the nature of what they are doing.
But at the same time, as in any country, exemptions also become a highly prized token which is more often unfairly distributed to those with the power to demand them or the favour to receive them through patronage. The impact of a poorly conceived or mismanaged exemptions regime is disastrous for a country’s finances.
Our current Prime Minister has, in several past budget presentations, openly expressed his apparent dismay at the level of concessions (which his government approved) granted year after year which reflect potential revenue lost.
Then in January, the Cabinet stated it would discontinue discretionary waivers on the forgiveness of Duty, ABST, Revenue Recovery Charge, and the Environmental Levy on the importation of used vehicles and on the sale of new vehicles.
In March, legislative action was taken to “close loopholes” and strengthen tax accountability according to the government. “It is part of our strategy to reduce the amount of discretionary exemptions to preserve the tax base,” the Prime Minister argued in March.
The government ought to report on the outcome of these policies when it presents its next budget. It also needs to address the manner in which corporate and other taxes are waived, on what basis, and consider seriously whether these things should be subjected to the recommendations of a tax authority that advises on short and long term impact of exemptions.
When for example, a company invests here and is granted exemptions on corporate taxes for successive decades – 20, 30, and 40 years – what impact does that have in the long term? Beyond anecdotal evidence, how often do such scenarios actually occur? How many present cases are there? And what is the revenue being given up?
Exemptions must not be extended for ridiculous periods of time. The aggregate impact of what has been exempted must be tallied so that policymakers and the public actually keep track of what has been given up. Qualifying circumstances need to be applied.
One has to admit that there is something fundamentally wrong where people are called upon to pay more in ABST in a society where large multimillion dollar companies are able to secure certain concessions for a vast number of years, or where large investors can woo the government into waiving the stamp duty on major land transactions between big money players.
Too often, the political attention of the government when it comes to raising revenue is on going after easy prey – the middle and lower income class. Up sales taxes and clamp down on concessions to the average person importing this and that. But large institutional players in the economy warrant the same level of attention, especially when a waiver for them in one instance could be the equivalent of what it costs to refurbish a school ahead of a new year, or repair a clinic in any of our communities.
Too often, the cry is that if such favour and concessions are not extended, investment will go elsewhere. CARICOM needs to find the strength to establish a unified regime which does not allow investors to hopscotch from island to island in search of whichever government will demand the least of them. In highly developed countries, they have to pay the same taxes or more, and often if they don’t, the taxman comes with handcuffs, not paperwork.
And we need to assess the socioeconomic impact of our taxation regime. Sales taxes and duties on many imports – how do these impact the cost of living for the lower income bracket especially? What happened to progressive taxation? What impact do exemptions for the super wealthy mean for the system?
When was the last time you heard of a comprehensive report on how taxation patterns were impacting upon the growth of each income class and the overall growth of the country? These are the sorts of analyses which ought to be done periodically and made publicly available.
Sporadic white knight action against one particular investor on the issue of taxes is far from sufficient. There needs to be a comprehensive reassessment of how we apply taxes, what impact it has, how we grant exemptions, what impact it has, and how we can arrive at the most reasonable framework, and how that framework can become a regional model. Otherwise we are exempting ourselves from our own development.
About the writer:
Kieron Murdoch worked as a journalist and later as a radio presenter in Antigua and Barbuda for eight years, covering politics and governance especially. He is an opinion contributor at antigua.news. If you have an opinion on the issues raised in this editorial and you would like to submit a response by email to be considered for publication, please email [email protected].
I am in total agreement here. How can we continue to give these big corporations and businesses tax breaks until Jesus returns? Those taxes could be used to lift our poor and disposed out of poverty instead of giving away the farm. And yes, all members of Caricom should band together forging a united front with similar policies. Don’t allow these corporations to shop around for the weakest link for united we stand but divided we fall and there is strength in unity.