Speaking during the presentation of the 2017/2018 Budget at the First Meeting of the Third Session of the Ninth Parliament on Thursday, Prime Minister, Roosevelt Skerrit reported that the government will be directing a National Fiscal Policy Panel to consider and advise on the abolition of the 15 percent and 25 percent income tax bands in the next fiscal year.
He proposed the formation of the National Fiscal Policy Panel (NFPP) to be made up of three independent experts with outstanding international reputations to provide the Government, Parliament and the nation with independent economic advice on matters relating to tax and spending policy during this transformation. Part of its job will be to advise the Government on economic and fiscal policies.
According to Skerrit to achieve the bold vision enunciated in the presentation, the country must have a tax system that incentivizes employment over consumption and income over idle assets.
“We shall be directing the National Fiscal Policy Panel to consider and advise on the abolition of the 15% and 25% income tax bands as early as the next fiscal year,” he announced. “Under this proposed system, Dominicans would only start paying income tax when their income reaches the 35% tax rate.”
This, he said, 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,” he stated. “In this move we are saying to all that Dominica is a place that does not penalize work and income.”
He went on to say that the most important aspect of this change would not only increase incentives to work and earn, “but it would also serve to simplify our tax system with only one rate of income tax.”
He mentioned further that the National Fiscal Policy Panel will be charged with the responsibility of advising on this measure, “and I would hope to be in a position, as of the next fiscal year, to gradually introduce this new income tax structure.”
“In the interim, however, Madam Speaker, I am aware of the great relief that our tax structure, as modified over the last seven years, has brought to hundreds of Dominican workers in the public and private sectors,” Skerrit added. “We have moved the income tax threshold from $15,000 to $25,000 and this has aided many.”
However, Skerrit said he still does not believe it has assisted enough employees on the island.
“ We shall await the advice of the experts, but in the interim, I wish to further 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,” he noted. “This means, Madam Speaker, that effective 1 st January 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 revealed that this measure is not being funded by debt but by adding a new feature to the Citizenship by Investment Program.
“Madam Speaker, in the medium-term we expect to replace this loss of income by adding a new feature to our successful Citizenship By Investment Programme,” he said. “We are examining a plan to encourage some of our new citizens who do not reside in Dominica, to consider becoming tax resident here.”
According to Skerrit the advantage for them would be a tax identification number which is increasingly becoming a requirement for carrying out international business.
“Our new citizens have already passed a thorough due diligence exercise and for those wishing to become tax residents here without being resident in Dominica for the normal requisite time, we may give them the option of becoming tax residents as long as they pay a minimum amount of income tax,” he stated.
This he said would serve a number of purposes.
“Most importantly, it would ensure that our engagement with our new citizens is deeper and more continuous,” he said. “But it also has the potential to provide a substantial amount of additional revenue annually.”
Additionally, he stated, “ It is likely that this new proposal, which must be designed carefully so as to maintain the integrity of our existing programme, could yield more than the $34 million raised last year by all of our existing income taxes.”
Skerrit said his government is excited that this proposal would graduate the CBI to a new level, from a programme based around an initial investment to one where there is 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 revealed.
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