Thousands of Dominicans to benefit from tax reform measures

Roseau, Dominica – July 20, 2007……. An additional 1,036 persons in Dominica will no longer pay income tax as a result of the increase in the non-taxable personal allowance, taking the total number of exempt persons in Dominica to a minimum of 3,149.

That announcement was made by Prime Minister and Minister for Finance and Planning, Hon. Roosevelt Skerrit as he delivered a $385.4 million budget to Parliament on Wednesday.

This is the second most far-reaching tax reform measure to be introduced in this country in recent times, the first being the introduction of the Value Added Tax (VAT) on March 1, 2006.

In his Budget Address, Prime Minister Skerrit announced that in keeping with the recommendations of the Income Tax Task Force and after careful review by Government’s advisers, “Government will be increasing the non-taxable personal allowance for individuals and lowering the rates applicable to the three tax bands”.

According to the Prime Minister, Government has set itself the goal of achieving four income tax adjustments over a three year period. Government’s intention is to increase the tax-free allowance threshold to $20,000, reduce the rate on the first $20,000 of taxable income to 15%, reduce the rate on the first $30,000 of taxable income to 25%, and reduce the rate on taxable income above $30,000 to 35%.

The Prime Minister stated that it would not be prudent at this time to implement the adjustment straight away, pointing out that such a move would result in a revenue loss to the Treasury of a minimum of $12 million. In light of this, with effect from January 1st 2008, “the following are the measures that will take effect in this the first year of the three-year personal income tax adjustment period”. The non-taxable personal allowance will be increased from $15,000 to $18,000 and the rate on the first $20,000 of chargeable income will be reduced from 20% to 18%; this band has been broadened from $18,000 to $20,000 so that more persons fall in a low tax bracket. The rate on the next $30,000 of chargeable income will be reduced from 30% to 28% and the rate on chargeable income above $50,000 will be reduced from 40% to 38%.

The January 1st 2008 income tax adjustment will cost the Treasury a minimum of $7.7 million.

The Minister for Finance also explained that the phased implementation of the income tax adjustment has three characteristics: The increase in the taxable income threshold caters to the needs and interests of the lower paid and in particular the ‘working poor’. The reduction in the top rate provides enhancement to the climate for business and investment in Dominica while the across the board reduction serves the interests of middle-income earners and brings a measure of equity to bear on the reforms.

“These measures represent clear and positive movement towards continuing reduction in the income tax. We are hopeful that next year and in subsequent years, Government will be in a position to announce additional relief, including possibly an adjustment to the income tax bands,” Hon. Skerrit concluded.