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Today’s Top Headlines

St Kitts Outlines Tax Reform Plans To IMF

by Phillip Morton, Investors

26 February 2013

The International Monetary Fund (IMF) on February 21, 2013, publicized a list of fiscal policy commitments that Caribbean territory Saint Kitts and Nevis has made for 2013 as part of its IMF-supported fiscal consolidation program.

St Kitts and Nevis is expected to have comfortably met the 2012 program target in respect of reducing the fiscal deficit. Tax receipts markedly improved during the year on the back of a strong direct tax-take and non-tax revenues from the Citizen by Investment program.

Looking ahead, the territory's authorities pointed out that the 2013 budget envisages higher revenues, the curtailment of current expenditure and increased capital expenditure. The budget targets a surplus of 1.7% of gross domestic product (GDP) in 2013, which will aid the territory to continue to reduce the deficit. In exchange for continued IMF support, Saint Kitts and Nevis authorities have outlined a number of tax measures to be implemented over the medium term to bring the territory's finances onto a more sustainable footing.

The majority of measures will focus on improving tax compliance rates and enhancing tax administration. St Kitts will look to strengthen audits, particularly of large taxpayers, and increase oversight of the newly-introduced value-added tax regime (VAT). The territory plans to further integrate information technology in its tax administration processes, including by enhancing its online tax return filing platform to make it more user friendly, and introducing automated audit capabilities.

Authorities have also outlined plans to undertake legislative reform, including harmonizing the Tax Administration Procedures Act with the VAT Act to extend best practices in enforcement of other taxes. In addition, authorities intend to align the provisions of the Small Business Act, the Fiscal Incentives Act, the Hotels Aid Act and the Special Resorts Development Act with international best practices

Lastly, authorities have detailed plans to further broaden the tax base, to include a thorough review of customs duties, and tax expenditures (which are estimated to amount to around 2% of GDP). The Government is to rethink which sectors should be eligible for tax exemptions, reduced consumption tax rates, and proposals to revoke current tax holidays in favor of greater accelerated capital depreciation concessions.

In 2009, St Kitts and Nevis had the most significant public debt among its Caribbean peers, at 185% of gross domestic product, and the third largest in the world as a percentage of its economy. Following the introduction of a value-added tax, considerable tax reform and debt restructuring, the Government expects to soon be able to announce that it has reduced its debt to below 100%, into double figures.

TAGS: compliance | tax | business | value added tax (VAT) | tax compliance | tax avoidance | fiscal policy | law | international financial centres (IFC) | budget | audit | enforcement | offshore | tax rates | Saint Kitts and Nevis | tax reform

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