By D. Michael Fox, CPA, CFE
As this article is being written, there is a public outcry against increased taxes announced by Government effective February 1st. For two days, union members are striking, businesses are closing, and crowds are shouting outside Government offices in Belmopan – all in protest. Still, it is unlikely Government will respond with any reductions or changes in its tax plan, because Government is essentially bankrupt and needs revenue from every source to survive.
This year's round of tax increases follows increases effective February 1st, 2004 in selected areas of business tax, sales tax, customs and excise duties, and land tax.
Business Tax increases will affect nearly every business.
(a) Those previously paying at rates of 0.75%, 1.25% and 1.5% will now pay at the rate of 1.75%. This will affect domestic airlines and service stations, previously paying 0.75%, all trades and businesses, previously paying 1.25%, and insurance companies, previously paying 1.5%. (Radio, television, and newspapers will remain unchanged at 0.75%.)
(b) Banks licensed under the Banks and Financial Institutions Act will now pay 15% instead of the former 10%, and Banks in PIC Groups will now pay 8% instead of the former 4%.
(c) Casinos will now pay 15% instead of the former 4%.
(d) Professionals (22 specific categories including accountants, attorneys, contractors, doctors and dentists, various agents and brokers, etc.) will now pay 6% instead of the former 4%, except that the increase for real estate agents is to 15% from 4%.
As a relief for small and medium businesses, the annual threshold for exemption from business tax is being increased from $54,000 to $75,000 annual revenue. (Presumably, the existing $54,000 revenue threshold exemption remains applicable in the Sales Tax law, so businesses with revenues between $54,000 and $75,000 will now be exempt from business tax taxation but not exempt from charging customers, collecting and remitting the 9% sales tax.) However, professionals will not benefit from this increased threshold exemption because of a previous change in business tax last February 1st, 2004, when their exemption threshold was lowered from $54,000 to $20,000 annual revenue.
Employee Income exemption levels of $20,000 annually were not lowered, despite the anticipated reduction to $15,000. So, workers earning $20,000 or less from their employers will still not pay any income tax on their wages.
Sales Tax rates, which increased February 1st, 2004 from 8% to 9% for most goods and services, were not raised despite the anticipated increase to 12%. However, the tax, which increased from 8% to 13% on February 1st, 2004 for alcohol, tobacco, fuel and a few other items, is now increased to 14%. Further, this high-rate 14% category is being expanded to include more goods that are considered luxury items (no specifics mentioned).
Environmental Tax is a tax assessed on all imported goods (in addition to import duties and sales tax). The present 1% tax is supposed to be designated for a special fund and be spent on solid waste management and disposal of refuse, cleanup of waterways, and related environmental concerns. This tax is now increased to 3%, and to 5% on vehicles over 4 cylinders. (Because these tax increases are required to lessen the Government's budget deficit, it is evident that their original intention for environmental concerns is now being disregarded.).
Excise Duty is charged on locally manufactured alcohol, beer, cigars and cigarettes, soft drinks/aerated waters. Duty on all liquids is being doubled, from $30 to $60 per gallon for alcohol, from $1.80 to $3.60 per gallon for beer, and from $0.0325 to $0.065 per bottle for soft drinks. Duty on tobacco is being tripled, from $4 to $12 per carton.
Revenue Replacement Duty is a tax imposed on specific imported goods considered "luxury" items (in addition to environmental tax, import duties and sales tax). Because of the increased Excise Duty on locally manufactured liquid and tobacco items, increases in Revenue Replacement Duty will similarly be applied to imported alcohol, beer, tobacco, and soft drinks.
Further information about this subject can be obtained by contacting D. Michael Fox at 226-2622 or email@example.com, or by visiting Fox Business Services, Island Plaza, Barrier Reef Drive.