The tourism and construction sectors were continuing to underpin the economy, he said, as they had done in 2005. All service sectors however had shown growth, including communications, banking and insurance.

Citing increased social costs as a result of the shut-down, Dr Douglas announced a range of tax increases, including a 5% levy on domestic telephone calls in St Kitts and Nevis, from January 1, 2007.

There will also be a 15% excise duty on alcohol and tobacco products, and an increase in the existing Social Services Levy from 8% to 10% on salaries in excess of EC$8,000 monthly.

The Prime Minister claimed that liberalisation of the telecommunications sector has driven down prices, so that, overall, costs would not increase. "We feel that the time is now right to extend the current tax on international calls to land based calls," he said.

Income tax legislation will also be amended to require companies to pay taxes at the same time as filing their tax returns; currently they have three months in which to pay. "This does not allow the Government to manage its cash flow in an effective manner. Therefore in order to address this issue the Income Tax legislation will be amended to allow for self-assessment and for payment to be made on the date of filing," said the Prime Minister.

Commenting on the new excise duties, he added: "This tax is consistent with our efforts at promoting healthy lifestyles among our people. Moreover, our health system incurs tremendous cost in respect of diseases associated with the consumption of alcohol and tobaccos. It is only fair that the users of these products be asked to bear a portion of this cost."