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SVG Budget Focuses On Property Tax

by Phillip Morton, Investors

03 February 2011

Prime Minister and Finance Minister of Caribbean territory Saint Vincent and the Grenadines, Dr Ralph Gonsalves has detailed a number of increases to taxation in the territory in his 2011 Budget.

Firstly, the Budget is to set in motion an overhaul to the islands’ property tax system. Gonsalves said that the government has over the previous two years been assessing the system under which tax is applied to real estate.

The government is seeking to phase out the current system under which property is assessed based on its annual rental value in favour of a market value-based assessment system. While the government has admitted it will take longer than anticipated to implement, the review will allow the government to revise the rental value of buildings currently under the tax net immediately, and begin collecting tax from properties that have yet to register to pay the tax.

Gonsalves said steps to introduce the new tax system will be taken this year, and will include a compliance drive to crack down on those with outstanding property tax balances from previous years, and tackle non-compliance by property owners failing to pay the levy. He said of 40,700 properties listed during the assessment, tax is being paid for just 25,940.

Secondly, the government plans to increases stamp duty payable on an exhaustive list of items, by an average of 20%, to update rates that have not changed since 2002. This is expected to yield XCD250,000 (USD92,600) in 2011.

In addition, to cut down on avoidance, the government has said that it intends to remove the exemption from stamp duty in respect of any conveyance or transfer operating as a voluntary disposition, without consideration in money or money's worth, between parents and children, bothers and sisters and spouses. Explaining the government’s decision, Gonsalves said:

“This exemption has been in operation for the last twenty years. The exemption is now being used by unscrupulous persons and lawyers to evade the tax, as evident by the large number of deeds of gifts relative to total deed of transfer which are registered each year. Five years ago I had warned that abuse of this concession beyond its intended scope would require an absolute response. It is unbelievable the extent of the abuse.”

Professional licence fees are also to be updated, having also last been updated in 2002. Gonsalves said that the government had seen a large influx of professionals since it had slashed the top marginal rate of corporate and personal income tax from 40% to 32.5%, and a 20% increase in the fee would bring in XCD120,000 per annum.

Motor vehicle licence fees are also to be hiked, by 15%, to generate an extra XCD1.3m per annum, which will go some way to funding highway construction work that is expected to cost the government some XCD100m.

TAGS: individuals | compliance | tax | Saint Vincent and the Grenadines | property tax | fiscal policy | law | real-estate | budget | fees | professionals | tax rates | stamp duty

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