The General Sales Tax is going up to 12.5% - that’s a 25% increase from where it stood at 10%. That’s the principal revenue measure being introduced by government to cover a $61 million financing deficit in the new budget. The sales tax increase will provide an additional $42 million in tax revenue and being a consumption tax, that $40 million will be paid by you. Its part of a package of tax measures that the Prime Minister introduced as the centerpiece of a budget called RECOVERY TODAY, PROSPERITY TOMORROW.
Hon. Dean Barrow, Prime Minister
We need to take the very difficult but unavoidable actions necessary to close the gap. Accordingly we will, these are the new tax measures: increase the business tax for supply of electricity services from 1.75% to 6.5%. This is only for the supplies of electricity and this is projected to yield an additional $10 million.
Second Mr. Speaker we will impose an excise tax on locally produced crude oil at a rate of $1 per barrel, projected to yield $1.8 million per annum. This is to provide additional revenue to government and is done especially to increase road maintenance on the Western and Hummingbird Highways necessitated by the transport of the crude oil to the port in Big Creek.
Finally, Mr. Speaker we have to increase the rate of the General Sales Tax from 10% to 12.5%. This will yield $42 million. We have had no choice in this matter. But even as we raise the GST, we are mindful of our promise to protect the poor and the local income earners. Therefore we are also proposing a slew of tax relief measures, designed to insolate the most vulnerable. The GST is a consumption tax and so we want to do two things: the first is to ensure that the absolutely essential items and in particular food stuff will actually see a drop in prices notwithstanding the generalized GST increase. In other words, basic ingredients for the average Belizean family’s everyday meals should now see a price drop after this budget.
Second, we want to increase the purchasing power of the fixed income people who are at the margins. Accordingly, starting with this latter point first, we are increasing the basic income tax deduction for employed individuals earning less than $24,000 per annum. This in effect would mean that all employed individuals earning less than $24,000 per annum will be exempt for tax while those individuals earning more than $24,000 will continue to be eligible for the current basic deduction of $19,600. Furthermore this change will take place retroactively to the tax basis year commencing 1st January 2010. So under this UDP Government no person with a salary of $500 per week or less will ever again have to pay a single penny in income tax.
Then Mr. Speaker we come to the removal of import duties. We are doing this on a wide range of food items, powder laundry detergents, agricultural equipment and machinery including tractor parts, agricultural packaging materials, and basic school supplies. I say again Mr. Speaker that we are trying to reach a point where import duties will be eliminated all together, save and except only in areas necessary for the protection of local industries.
There will also be a 3.5% tax introduced on export processing zones and government will try and collect tax arrears particularly from large landholders. But combined those are only projected to deliver about $8 million of a $62 million net increase in tax revenue. At $42 million in increased proceeds, there’s no mistaking that the general sales tax will provide the majority of the additional revenue to bridge the financing gap.
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