Dominica on path of growth
ROSEAU– Prime Minister Roosevelt Skerrit says Dominica is on the path towards prosperity based on the performance of the economy.
Skerrit on Thursday presented a budget of EC$918,255,358 (One EC dollar =US$0.37 cents) against the backdrop of the island being on a path of growth in 2016, despite setbacks in 2015 due to the passage of Tropical Storm Erika.
In his presentation themed -“Realising a modern and prosperous Dominica” – Skerrit said the economy recorded growth of 2.8 per cent.
“The Eastern Caribbean Central Bank (ECCB) says the Dominican economy is expected to grow by 3.1 per cent in 2017 and 2018 – this buoyant outlook contracts sharply with the rest of the Caribbean and Latin America….the growth experienced by Dominica is clearly better than the rest of the Caribbean “
“This is Dominica’s moment and we as a country must seize it; we could cash in the growth dividend of successful economic management with a broad expansion of existing spending programmes. That would be far easier…but this government is not in the business of sitting back and basking in its success. What we propose is a bold journey that begins this morning,” said Skerrit.
The Prime Minister stated that total expenditure is projected at EC$930,185,008 this includes recurrent revenue of EC$786,462,296 and recurrent expenditure (inclusive of debt service at EC$580,482,418.
He noted that consistent with the anticipated growth in the economy, tax revenue for the fiscal year is projected at $365.5 million.
“Taxes on domestic goods and services take up the largest slice at $203.0 million or 25.8 per cent of the total. This is followed by corporate income tax estimated at $39.8 million and personal income tax at $34.0 million.”
According to the Prime Minister, non-tax revenues of $421.0 million are anticipated – a significant part will come from the Citizenship By Investment Programme which is expected to contribute $399.9 million for the year.
The lion’s share of the budget will go toward the Ministry of Finance – that of $241.9 million.
“Included in this amount is a provision for meeting the cost of promotional activities and payment of due diligence fees relating to the Citizenship By Investment Programme (CBIP) in the sum of $101.7 million.”
Others areas of receiving significant allocations include the Ministry of Education and Human Resource Development, the Ministry of Health and Environment and the Ministry of Justice and National Security.
The Ministry of Tourism and Urban Renewal has been allocated $17.8 or 3.1 per cent of the budget.
“This represents an increase of $3.5 million in the marketing budget to allow for increased marketing in major source markets, improved connectivity, and promotional activities leading up to Reunion 2018. The increased allocation will also allow for expansion in community tourism, enhancement of various tourism sites and urban areas, and development of the yachting sector,” he said.
The Dominican leader said talk of building a modern and prosperous Dominica comes easy but in order to implement transformation certain steps need to be taken.
Based on this the administration plans to establish a National Fiscal Policy Panel (NFPP) with three independent experts who will provide the government with independent economic advice.
“A National Fiscal Policy Panel can make for enhanced national governance through its consultations with and openness to various groups and individuals in the society who may have ideas and proposals for moving the country forward and dealing with the pressing issues of growth, social integration and employment generation.”
Skerrit, who is also the Minister of Finance, said that the “transcending purpose of the panel would be to advise the Government on how to maximise opportunities for increasing economic growth, social integration and employment generation. The Panel would need to be supported by a small secretariat of persons with research capability, energy and competence in economics, social sciences or other relevant fields.”
The members of the Panel will be appointed by the Prime Minister who will name the members within the next 30 days in order for work to commence by September 1.
In the area of taxes, Skerrit said in order to achieve the government’s vision there must be a tax system “that incentivises employment over consumption, and income over idle assets.”
“Consequently, Madam Speaker, we shall be directing the National Fiscal Policy Panel to consider and advise on the abolition of the 15 per cent and 25 per cent income tax bands as early as the next fiscal year.
Under this proposed system, Dominicans would only start paying income tax when their income reaches the 35 per cent tax rate.
“This is a major, bold, move. By this measure, we will remove from the payment of income tax, all Dominicans earning less than what can be termed a decent middle income salary, and all of those earning more will only pay tax on their income above this level. In this move we are saying to all that Dominica is a place that does not penalise work and income.”
He said the NFPP will be charged with the responsibility of advising on these measures –“and I would hope to be in a position, as of the next fiscal year, to gradually introduce this new income tax structure.”
The Prime Minister announced that until the new structure is in place – he would ease the burden and enhance the cash flow of workers in Dominica, by increasing the minimum income tax threshold from $25 000 per year to $30 000 per year.
“This means, Madam Speaker, that effective January 1 2018, no person earning $30 000 a year or less will pay income tax and those working for more than $30 000 a year, will have the first $30 000 exempted from income tax deductions.”
He added that in the medium term in order to replace the loss of income a new feature will be added “to our successful Citizenship By Investment Programme.”
“We are examining a plan to encourage some of our new citizens who do not reside in Dominica, to consider becoming tax resident here. The advantage for them would be a tax identification number which is increasingly becoming a requirement for carrying out international business.”
He said for new citizens who wish to become tax resident here without living on the island for the normal requisite time, they may be given the option of becoming tax resident “as long as they pay a minimum amount of income tax.”
“This would serve a number of purposes. Most importantly, it would ensure that our engagement with our new citizens is deeper and more continuous. But it also has the potential to provide a substantial amount of additional revenue annually.”
Skerrit said that it’s likely that this new proposal, could yield more than the $34.0 million raised last year by all of the existing income taxes in the country.
“We are excited that this proposal would graduate the CBIP to a new level, from a programme based around an initial investment to one where there was a constant flow of annual taxes from new citizens. As soon as we are satisfied that we have the right design and have fully assessed the costs and benefits and the risks and opportunities we will bring it to Parliament,” he said. (CMC)