BVI Government Should Have Consulted More On Tax Reform, O'Neal Argues

by Amanda Banks, for LawAndTax-News.com, London

08 December 2004

In a recent interview with the Island Sun, the British Virgin Islands' Opposition Leader, Ralph T. O’Neal, chided the government for failing to ensure that adequate public consultation on the forthcoming tax reforms was undertaken.

“The new tax policy is a fundamental change in tax legislation, it is also a serious matter since income tax brings in one of the largest pools of revenue after the International Business Companies (IBC) licence fees. The changing of the present tax policy is a task that requires careful consideration because on one hand you do not want to upset the people involved with the IBC and on the other hand you can’t be too hard on the low income people. Consideration must also be given to the local companies who have to pay tax,” he told the newspaper.

As a result of international pressure, BVI’s dual taxation system will be abolished, meaning that from 1st January the 15% corporate tax will be eliminated for local businesses and the current income tax system for employees will also disappear. In its place, the government originally proposed a new payroll tax to be levied at a rate of 16%, half of which will be paid by the employer and the other half by the employee, with the first $7,500 of income exempted.

However, the legislation was subsequently amended, meaning that the contribution for small business (defined as those employing less than seven people and with a payroll of less than $150,000 per year) has been reduced to 2%, whilst all other businesses will contribute 6%. The 8% contribution level for each employee remains unchanged.

Citing the introduction of the employment tax and Pay As You Earn (PAYE) system as examples of good government practice in terms of consultation, the Leader of the Opposition announced that:

“I am in sympathy with persons who said that the Government should have consulted with the public before they made this fundamental change. And this change is something that the Government will have to get the people accustomed to."

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