Government scraps personal income tax

“Effective April 2016, personal income tax will be abolished in its entirety,” that’s how Prime Minister Gaston Browne announced the end of a measure that has been in place since April 2005.

Browne, who is also finance minister, was delivering the 2016 budget in Parliament when he gave the news.

While personal income tax (PIT) will be removed other taxes will be increased.

“The loss of $37 million from the elimination of personal income tax will be partially substituted, and I emphasize partially substituted, by an increase in the revenue recovery charge, the RRC, from 10 per cent to 13 per cent, which is expected to yield an additional $20 million in revenue,” he told the House.

Browne reasoned that the substitution would be a net reduction of the tax burden of about $17 million. He did not mention, however, the increasing rates of payroll deductions going to Social Security and Medical Benefits and that water rates are also expected to go up. Browne warned of the changes last year.

While the changes in line for water and Medical Benefits have not yet been detailed, Social Security Executive Director David Matthias has said that starting with a 2 per cent increase this year, employer and employee contributions to Social Security will rise annually until the combined rate is 15 per cent.

The removal of PIT was a major plank of the Antigua and Barbuda Labour Party’s 2014 election campaign. The administration came under fire when, just after the election, it announced that it would be too devastating to government finances at that time to cut the much disliked PIT.