Anguillan Budget Vetoed

by Jason Gorringe, Tax-News.com, London

10 January 2011

The UK Governor in Anguilla, Alistair Harrison, has announced that he will not "sign off [Anguilla’s] 2011 budget as it stands."

“I have informed members of Executive Council (EXCO), and will be confirming in a letter to all members of the House of Assembly, that I will be instructed by the Secretary of State to reserve the 2011 Appropriation Bill for signification of Her Majesty’s pleasure.”

“UK ministers will be writing shortly to the Chief Minister explaining the background to this decision, and to propose a way forward so that the governments of the United Kingdom and Anguilla can agree a budget for 2011 that puts Anguilla’s public finances onto a more sustainable footing.”

“In taking this step, the British government has not indicated that it seeks to impose a particular budget settlement, or a particular level of reduction in expenditure or in the numbers of the public service; but it will expect the cooperation of the government of Anguilla in moving forward.”

The Budget delivered by Hughes on December 23 foresaw a significant reduction in the island’s budget deficit, forecast at XCD11m, with expenditure of XCD188m (USD69.6m) and revenue of XCD177m. The budget deficit amounted to XCD36.9m in 2010, down from XCD66.2m in 2009.

The Budget however optimistically projects an increase in revenues of XCD41m on last year’s projections, despite revenues collected in 2010 falling significant shy of targets. Tax measures proposed to be introduced in the Budget were expected to increase the tax take by just XCD21.3m presenting questions as to where the rest of the forecast revenue intake is going to arise from, particularly as the Anguillan economy continues to struggle.

The budget proposed:

• An increase in the tax rate of Property Tax from 0.0015% to 0.00375%;
• The implementation of a 7% levy on the sale of petroleum products, such as gasoline and diesel at the retail level, as announced previously;
• The introduction of an Interim Stabilization Levy at a rate of 3% on the gross income of employees, to be matched by the employer. Self-employed persons will be subject to a 6% rate on earnings;
• Marginal increases on various licences, namely driving licences, liquor licences, food premises licenses, and villa rental licences; and,
• An increase from 1% to 3% in the Customs Administrative Surcharge.

The UK government is to publish its rationale for vetoing the budget in due course, Harrison has said.

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