PHILIPSBURG–The five-per-cent turnover tax (ToT) is “disruptive” and an “impediment to economic growth” due to its “multiplier effect” on the cost of goods and services, Finance Minister Richard Gibson told Parliament on Wednesday.
“We have to do away with it or move it down,” Gibson said of the ToT. He has the same belief about the country’s profit tax. It is tough to enforce the profit tax system, he said. The system is “human resources intensive,” a resource Government has in limited supply.
An approach to taxes that is “easy to collect” and “does not hit the small man” needs to be found, Gibson said.
The World Bank and International Monetary Fund (IMF) both have reported that direct taxes such as ToT are disruptive to economic growth. The monetary agencies have advised a move to a value-added tax, Gibson said in the meeting of the Central Committee of Parliament on the draft 2016 budget.
The downside of moving to a value-added tax is that it will lead to a significant reduction in Government revenues, Gibson said. “Ways and means need to be found first to replace the ToT” before a change is made, he said. “We will have to take a deeper look at the ToT.”
The tax also “affects employment,” as businesses can hire fewer people due to operational cost, Gibson said in response to questions from Member of Parliament (MP) Tamara Leonard about the ToT’s workability.
Leonard pointed out that Government has had diminishing yields in spite of the increase in the tax from three to five per cent some four years ago.
On the shrinking yield from ToT, Gibson said the increase of ToT contributed to “cheating” and had created “parallel importation” that results in fewer purchases locally. “Amazon and other online shopping are having a ball,” he said, explaining the dip.
On increasing tax compliance, Gibson said the letters from the Tax Office to delinquent taxpayers needed to have an air of finality and prompt immediate action, working on collection and compliance by Government via the Tax Inspectorate.
Government in the past has had “an explosion of hiring consultants for everything under the sun,” said Gibson said, adding that he had stopped all pending consultants’ contracts on taking office last year. “We need to hire people in Government to do the work,” he said. “We need to do much more on our own.”
Government “will have to review” the existing consultants, Gibson said.
Source: The Daily Herald ToT is ‘disruptive’ to growth, says Gibson