The new St Kitts-Nevis Labour (SKNLP) administration of Prime Minister the Hon. Dr. Terrance Drew is cautiously optimistic that the St Kitts and Nevis economy will improve in 2023.
Delivering his first Budget Address in the National Assembly since taking office four months ago, Dr. Drew in his capacity as Minister of Finance disclosed that some of the core elements of the COVID-19 pandemic support, "would remain in place up to June 2023 by which time we hope to have had a comprehensive stocktaking and updated information on the actual state of affairs in our economy."
Outlining his Government's Fiscal Measures and Strategic Interventions, Prime Minister Drew noted the significant uncertainties and challenges that confront the global economy necessitate the development of realistic policies to minimize the impact of exogenous shocks that may emerge and affect St. Kitts and Nevis.
He told parliamentarians and the Nation that one aspect of his Government's Fiscal Strategy is to have a predictable and stable revenue base they can rely on to fund the various Public Sector programmes.
"The Medium-Term Fiscal Strategy will therefore focus on the following: Reducing the heavy reliance on CBI inflows to finance the execution of Government’s recurrent programmes, preserving the tax base by limiting discretionary concessions such that the granting of tax concessions would be based on the provisions of relevant legislation governing the tax regime, continuing to strengthen the administration of the tax system including the review and enforcement of the policies to support taxpayer compliance and assessing and actively pursuing the collection of arrears to Government Revenue Agencies," said the Prime Minister and Minister of Finance.
Hon. Dr. Drew further stated other measures include "containing and reprioritizing Government expenditure, designing an appropriate framework for the introduction of Fiscal Rules to guide and strengthen Government’s fiscal operations, completing the work for the establishment of a Sovereign Wealth Fund and reviewing the Protection of Employment Act, specifically those sections that pertain to severance payments and Long Service Gratuity, to ensure that the Severance Payment Fund is sustainable, contributions to the Fund are adequate and any loopholes in the Legislation are closed."
The Government, he further pointed out, will complete the work necessary to facilitate the introduction of Unemployment Benefits Legislation and re-assessing and centralizing the administration of the various Social Safety Net Programmes to ensure that the Programmes are sustainable and target those persons who are in need.
"Madam Speaker, it was alarming to the new St. Kitts-Nevis Labour Party Administration Team to discover the extent to which the financing of the Government’s operations has been relying on the CBI Programme. This is not sustainable and will not provide a solid foundation for us to build out our vision for a sustainable island state," he said.
Dr. Drew added: "Over the medium-term, we must therefore chart a different course by reducing the current heavy reliance on CBI inflows to finance the Government’s operations. Development partners such as the International Monetary Fund (IMF) have, in the past, raised this as an issue for the Government to seriously consider as part of its work to strengthen the policy framework. Our vision is for the CBI revenue to be used to finance transformational projects in the Federation. The CBI Programme would be better utilized to bring about vast improvements in our country’s Health and Education Sectors. It would be better utilized to enhance our public infrastructure including our roads and electricity and water supplies. The Programme could be of great assistance in the digital transformation of our economy as well as our transitioning of the green and blue economies. The development of resilient infrastructure would undoubtedly attract further investments to our shores and allow for our people to capitalize on emerging opportunities. It would play a key role in our goals of diversifying the economy and job creation."
He said St Kitts and Nevis cannot continue to turn a blind eye to the steady erosion of the tax base as this is not consistent with international best practice in Public Financial Management.
Pointing out that there is much room for improvement in the rate of compliance with the various tax legislation, Prime Minister Drew encouraged all citizens and residents to be responsible and honour their tax obligations as they become due.
"At the same time, we understand the need for the Government to do what we can to continue to support the recovery of our economy. We are also conscious of the need for a comprehensive review of the measures put in place to support businesses and households over the past two (2) years. The reality is that as economies across the globe regained growth, many countries have already dialled back their pandemic support. This trend suggests that our Government should make similar policy decisions as the economy is demonstrating signs of rebound in practically all sectors and this trend is expected to follow in 2023," said Dr. Drew.
The Prime Minister added, "We are, however, cautiously optimistic and have determined that some of the core elements of the pandemic support would remain in place up to June 2023 by which time we hope to have had a comprehensive stocktaking and updated information on the actual state of affairs in our economy. Towards this end, our Government will continue to support the reduction of the Corporate Income Tax Rate from 33 percent to 25 percent for businesses that retain at least 75 percent of their employees and the reduction of the Unincorporated Business Tax Rate to 2 percent, down from 4 percent, until June 30 2023. This will allow for the time necessary for consultations with key stakeholders in the Private Sector to help determine the policy direction of the Government.”
He said his St. Kitts-Nevis Labour Party (SKNLP) Cabinet looks forward to engaging with the public on these and other important matters concerning good tax governance.