Grenada Examines Issue Of Tax Reform

by Amanda Banks, Tax-News.com, London

23 February 2004

Grenada is to soon introduce a transaction tax to replace revenues lost from the removal of tariffs and customs levies resulting from the jurisdiction’s participation in regional trade initiatives.

Delivering the government’s 2004 budget earlier in the month, Minister of Finance Anthony Boatswain observed the pressing need for the country to undergo fundamental tax reform. He observed that “the process of trade liberalization means lower and fewer import duties with the ultimate aim being to eliminate them altogether. This process will lead to an eventual loss of government revenue from custom duties and taxes thus undermining Government’s fiscal regime.”

According to the minister, in 2003, 53% of the government’s revenues were derived from customs duties and other related sources, highlighting the jurisdiction’s dependence on tariff income.

“Clearly, the process of liberalization necessitates appropriate and timely fiscal adjustment if Government is to remain viable and provide the current level of services required by the citizens of this Country,” he noted.

Mr Boatswain announced that the government is to establish a special unit within the Ministry of Finance to coordinate the tax reform process, with a view to introducing a VAT (Value Added Tax) style transaction tax.

In the meantime, for the year ahead, the Finance Minister announced that all other tax rates are to remain unchanged.

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