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December 14, 2005

All telephone calls including domestic ones, will attract a five percent tax from January 1st next year.

This was one of the fiscal measures announced Tuesday by St. Kitts and Nevis’ Prime Minister and Minister of Finance, the Hon. Denzil L. Douglas when he presented a EC$494.7 million Budget for 2006 in the National Assembly .

In his three and a half hour presentation, Prime Minister Douglas also announced an 15 percent excise duty on alcohol and tobacco products and an additional two percent increase in the Social Services Levy that applies only to that portion of salaries in excess of EC$8,000 monthly.

He pointed out that with the liberalisation and increased competition in the telecommunications sector which is exerting downward pressure on the price of the telephone service, it is unlikely that the overall telephone bill of consumers would increase substantially in 2006 even after the revised tax is levied.

Dr. Douglas said the liberalisation of the telecommunications sector has also opened up opportunities for not only other companies to engage in this business but the competition has served to reduce prices considerably.

“We feel that the time is now right to extend the current tax on international calls to land based calls,” said Dr. Douglas, who pointed out that the liberalisation of the telecommunications sector was a very costly and time consuming exercise and the Federal Government was still servicing a loan from the World Bank that was used to finance the liberalisation process.

“The increased tax will therefore assist in the servicing of this loan,” he told the Federation.

Dr. Douglas noted that the current Income Tax Legislation requires companies to file their tax returns by the 15th of April each year but allows them three months after their assessment to make payment to the Inland Revenue Department.

“This does not allow the Government to manage its cash flow in an effective manner. Therefore in order to address this issue the Income Tax legislation will be amended to allow for self-assessment and for payment to be made on the date of filing,” said Prime Minister Douglas, who emphasised that this does not represent an increase in taxation. “It merely requires earlier payment of the Income Tax paid by corporations,” he said.

According to Dr. Douglas, as St. Kitts and Nevis begins to tackle the fiscal impact of the closure of the sugar industry, matters such as the servicing of the debt, providing for the health, training and social protection of former sugar workers, the maintenance of the environment and land management issues, have cost implications.

In trying to come up with innovative ways of raising revenue to assist with the sugar transition, the Federal Government has been consulting with its economic and social partners on the tax system that they feel would be best suited to the structure of the new economy and have also been studying the proposals of the Tax Reform and Administration Commission.

Dr. Douglas said that one of the overlapping areas of concern is with respect to the lack of ‘progressivity’ of the Federation’s tax system in the absence of personal income tax.

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