Antigua & Barbuda: Prime Minister Unveils Budget For A Fiscally-Challenged Government

Amanda Banks, Tax-news.com, London

26 March 2001

Antigua & Barbuda Prime Minister, Lester Bird, presented his budget speech last week and announced a range of measures to raise some much-needed revenue for the fiscally-challenged government that will 'set us on the road to a modern and transparent financial system and the restoration of fiscal balance,' he said.

According to a report in the Antigua Sun, Mr Bird, who is also Finance Minister, announced during his budget speech plans to introduce a 3 per cent tax on the 'gross profit' of offshore banks, trusts and insurance companies, which he identified as: 'interest from operations and investments minus interest expenses.' A further tax will be levied on the 'gross handle' of Internet gaming, sports books companies and virtual casinos. Mr Bird stated: 'This tax will compensate government for the increasing expenditure involved in regulating both sectors and in meeting the costs of the considerable efforts in the international community to safeguard them. Taxation will also go some way towards meeting the concerns of the OECD that entities operating in these sectors should not be taxed at all.'

In addition a 2 per cent tax on Western Union's outgoing transactions will also be imposed. Mr Bird described the amount of transactions as "considerable" particularly with companies that are not registered in Antigua. He argued: 'It cannot be fair or right that the telecommunications and other infrastructure paid for by persons and organizations within this society, are being used without charge by foreign entities.'

The government also plans to raise the Customs Service Tax (CST) from 5 to 10 per cent on all goods with the exception of staple food items, medicines and petroleum products. Mr Bird said the government hopes this will generate an extra EC$23 million (East Caribbean Dollar) in revenue and argued that the increased CST was necessary due to the country's treaty obligations to the Caribbean Community and Common Market and the World Trade Organization under which the government is required to lower or remove duties on some imported commodities.

Further budgetary measures included abolishing the practice of 'ad hoc' wage increases to established and non-established government workers and merged and downsized government work programmes to ensure that people are 'productively employed.' 'Where it is found necessary,' declared Mr Bird, 'there will be retrenchment. These measures are expected to reduce payroll expenditures in 2001 by approximately EC23 million.'

The Prime Minister also looked to the drop in employment in the private sector - over 300 people who attended government training schemes are now employed in private firms and companies but the government training programme that took place last year alone cost the government EC$7.2 million. He said: 'Had it not been for substantial public investments over the past decade, and the creation of financial and non-financial public enterprises which served as catalysts for economic activity in the private sector, the level of unemployment would have risen to a point where it would have threatened social stability and jeopardized the high standard of living that we almost take for granted these days.' And he called upon the private sector and businesses to employ workers that had benfited from the government's training programmes and to 'assume responsibility for these salaries and wages which are, in fact, a form of government subsidy to the business sector,'

According to the Prime Minister the budget was based on his decision for Antigua & Barbuda to become more self-reliant, he said: 'The time has come for our people to be more self-supporting through our own efforts and contributions, we can no longer look outside our borders for generosity.' However, despite his best efforts there is an expected deficit of EC$8.7million (US$3.2million). Recurrent revenue is expected to net EC$511.8 million and recurrent expenditure has been tagged at around EC$503 million.

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