Belize Budget Hikes Taxes

by Phillip Morton, Investors Offshore.com

29 March 2010

The Belizean government has presented measures in its 2010 budget to counteract the fall in tax revenues experienced during 2009/10.

During the 2009/10 fiscal year, revenues are estimated to have been 11.2% below budget at BZD594.9m (USD305), with collections lower in all Belize’s major tax sources. Receipts from direct taxes tended to be more resilient in the face of the economic downturn, while indirect taxes were severely hit. The island’s General Sales Tax receipts suffered the largest decline (19.3%).

Revenue measures introduced in the budget, worth BZD109.7m (USD59.3m), will mean that the government posts a smaller budget deficit of BZD64.7m in FY2010/11, down from BZD81.6m in FY2009/10.

The salient budget measures include:

• An increase the rate of the General Sales Tax from 10.0% to 12.5 % - projected to yield an additional BZD42.0m;
• An increase to the business tax rate for the supply of electricity services, from 1.75% to 6.5%, increasing the tax take from the sector by BZD10m;
• The introduction of an excise tax on locally produced crude oil at a rate of BZD1 per barrel, yielding BZD1.8m;
• The introduction of a ‘Social Fee’ of 5% on goods and services imported in an Export Processing Zone, yielding a further BZD3.5m;
• A crackdown on outstanding tax arrears, particularly land tax, which will bring in around BZD4.2m.

The government has also introduced tax concessions, including:

• Increasing the tax exemption threshold for personal income tax to BZD24,000 (USD12,300), up from BZD19,600;
• The removal of import duty on a number of goods including basic food items, powdered laundry detergents, agricultural equipment and machinery including tractor parts, agricultural packaging materials, and basic school supplies.

Revenues are also to be bolstered by improvements in the economy, with receipts expected to be BZD10m improved on FY2009/10. Business Tax is expected to be BZD32m higher, BZD10m of which will come from the new rate being applied to the supply of electricity services, while another BZD20m is due from improved registration, auditing, and assessments, as part of a crackdown on larger taxpayers. A further BZD15m is expected from improvements in receipts from the jurisdiction's smaller taxes and fees.

Receipts from local petroleum operations are also expected to rise by BZD8.8m from increased profits in the sector, and from petroleum royalties.

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