Anguilla Announces Budget Measures

by Phillip Morton, Investors Offshore.com

04 May 2010

Anguilla’s Chief Minister, Hubert Hughes has announced budgetary measures as part of the government’s 3-year plan to put Anguilla’s finances back on track.

As announced by the government in March, Anguilla’s financial situation is critical; at the time, the government admitted that "serious measures" were needed as part of a forthcoming fiscal policy review. Anguillan revenues were reported to have declined 30% over the last two years, allowing government debt to drift to XCD172.1m (USD66.4m) in 2009.

Before taking into account measures in the budget, worth an extra XCD27m, the island was expected to post a budgetary deficit of over XCD89m in 2010. Forecast expenditure of XCD212m, is to be 12% lower than in 2009.

Presenting the budget, Hughes admitted that there was little room for manoeuvre on fiscal policy or on expenditure. He indicated that the island would continue to market itself “as a financial services destination that is on par with the best in the world.” To ensure this, Hughes reassured that the government would not implement any income, corporate or sales taxes.

Responding to a study on the possible introduction of a value-added tax (VAT) in the jurisdiction, Hughes said that it would be detrimental to the already ‘dead economy’ of Anguilla, but he did not rule out the possibility of introducing VAT in the longer-term.

On measures to bolster revenues, Hughes said that customs duties would increase. Meanwhile duties were removed on prescription medication, bicycles and fishing related equipment. In addition, to support the yacht racing industry, products used in the manufacture or maintenance of racing boats will no longer be subject to duties.

Hughes also announced that the property tax rate is to be increased to 0.0020%, from 0.0015%. License fees, which have not been updated in the last five years, are to be revised upwards in line with inflation.

“Given the decline in the collection of recurrent revenue, it was imperative that new revenue measures were introduced to lessen the financial gap,” Hughes explained.

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