STATEMENT BY HONOURABLE LESTER B BIRD PRIME MINISTER ON 13TH OCTOBER 2000

Fellow Citizens

You will recall that last Friday I made a statement to this nation concerning the Income Tax (Amendment) Act 2000.

I said that my government had listened to the helpful and constructive suggestions made by some members of the community. I acknowledged that we live in a democracy in which account must be taken of views that are aimed at helping the society as a whole.

In that context I announced the following things:

1. Government would repeal the Income Tax Amendment Act 2000.

2. Government would also repeal the 25% business tax.

3. Government would now only expect incorporated companies such as the commercial banks and Cable and Wireless to pay 40% tax on their profits.

4. All other businesses, including sole traders, partnerships and professionals would be expected to pay only 2% on their gross income but with certain further concessions granted to them.

5. These concessions are:

a. The first $50,000 per annum earned by partnerships, sole proprietors and professionals will be completely free of any taxation whatsoever.

b. The restriction of 25% of net profit on wages, salaries, directors' fees and other services rendered by owners, their spouses and children will no longer apply. In other words, these deductions can be made from gross income, provided that they are consistent with payments made for similar services.

c. Bad debts may be deducted from the calculation of gross income; and

d. A grace period of 90-days will be granted for credit sales.

Despite these considerable concessions, I have received a letter written by certain members of the business community stating that they are "agitated and vexed" because they are required to pay the 2% tax.

I have replied to these business interests expressing my disappointment that they should be "agitated and vexed."

I have pointed out to them that if there is any group in this country that should be "agitated and vexed," it is the poor people of this country who are carrying the burden of taxation by indirect taxes on imports while many people in the business community refuse to pay taxes that are lawfully due and payable.

I had to point out to them that there is a shameful record of no payment of taxes by many non incorporated businesses in Antigua. For instance:

Last year more than 2,000 businesses paid only $1.5 million in taxes. When it is considered that Government's total revenue last year was $300 million, you will recognise that these businesses paid less than 0.1% of revenue that the State earned to provide essential services and infrastructure.

Further, last year, the government spent more than $80 million on roads, police services, health and education. The tax of $1.5 million paid by 2,000 businesses was less than 2% of these costs which were of great benefit to them.

The paltry tax of $1.5 million paid by more than 2,000 businesses was far less than was actually due and payable by them. As an example, an analysis done of eight businesses shows that, by their own figures, their turnover in one year was $96 million. Despite this, many of these eight businesses paid no taxes claiming that they made no profit. In fact, they claimed that they had made no profit for several years. Nonetheless, they all deducted as expenses from their bottom line, rent and salaries both of which are tax free.

The staggering fact is that, when combined, these eight businesses that had a turnover of $96 million in one year claimed that they made a loss of $5.5 million. This clearly indicates that the operators of these businesses are either very bad businessmen and their businesses ought to be in bankruptcy, or accounts have not been fairly and accurately presented.

Of these eight businesses that have been analyzed, only two of them paid any portion of the tax for which they were assessed.

In these circumstances, it is difficult to see what possible justification there can be for some members of the business community to be "vexed and agitated" over the 2% tax on gross income despite all the considerable concessions that the government has made.

It is the majority of people of this country who should be vexed and agitated and the flagrant refusal of some members of the business community to pay their fair share of the costs of the infrastructure and services that they enjoy.

It is abundantly clear that more than 2,000 businesses are evading the payment of lawful taxes and have been doing so for some time. It is also clear that a mechanism has to be put in place to stop this abuse which places a greater burden of indirect taxation on the poor in our society. These 2,000 businesses benefit enormously from the services and infrastructure provided by the State. It is only fair that they should pay their due.

It is worth noting that with all the concessions the government has made, professionals will certainly pay less tax by paying the 2% on gross income than they would by paying the 25% business tax which the law now requires. Further, many sole traders and partnerships have indicated to the government that it would be cheaper to pay the 2% tax on gross than to pay the 25% business tax particularly when it is considered that they will not have to employ expensive accountants and auditors.

Yet, there is a resistance to paying the tax. It seems that there are some business persons in our community who feel that they have a right to make money and to live well, but they have no responsibility to pay their fair share of the cost of maintaining our country.

No reasonable person could agree with that attitude.

To mask the fact that they do not wish to pay taxes, these members of the business community have raised what they call "collateral matters". I should point out that none of these matters have any bearing on their legal obligation to pay taxes due to the State. They have raised these issues merely to try to divert attention from the central issue, which is that they do not want to pay any taxes.

One of the matters they raised is audited accounts of government business. I have told them that my administration is resolved to bring all the government's books up to date quickly. Considerable progress has been made in this regard and some reports are shortly to be submitted to the Public Accounts Committee. Further, the government is presently recruiting two experienced government auditors from abroad to strengthen the office of the Director of Audit and their work should bring the records up to date within a very short time. You can see, therefore, that the matter of accountability for government's expenses is being addressed fully.

They have also raised government procurement policies. I have told them that my administration is in complete agreement that tendering should be open to all businesses on government contracts. The authority of the Tenders Board to offer government procurement to bids from the private sector has already been strengthened and will be further bolstered.

The matter of public sector reform was also raised. I have stressed that the government is resolved to reform the public sector to make it more productive and more responsive to public needs. However, we will not reduce the size of the public sector and place people out of work and a livelihood. Were we to do so, we would be creating unemployment, increasing crime, and fostering hardship for the entire community including the business sector itself which would suffer both from a decline in spending by public servants and possibly an increase in crime. Public sector reform has to go hand in hand with fiscal reform that includes the payment of taxes by the business community.

The handful of business people who wrote to me also advocated that the government should stop price controls. I have had to tell them that price controls were put in place to help the poor in our society and to stop profiteering by some unscrupulous business persons. Nonetheless, I told them that I will ask the Minister of Industry and Commerce to arrange a meeting with them to explore their ideas as long as they don't further disadvantage the poor people of our country.

The truth is that while these matters are worthy of discussion, they have no bearing on the responsibility of businesses to pay taxes in accordance with the law. Nor, indeed, does the matter of Tanny Rose to which they also referred, and which is receiving appropriate attention.

Indeed, it seems that, even though the government has granted several exemptions from gross income, there is an unreasonable resolve on the part of several businesses not to pay their fair share of costs of the State's provision of infrastructure and services from which they benefit handsomely.

I very much regret the attitude being displayed by some of our business people. At the same time, I applaud the civic-mindedness of those other business people who recognise that they benefit from the services provided by the State, and are prepared to pay their fair share of taxes.

My government intends to proceed with the measures that I announced last Friday - and that I have repeated tonight - including the generous concessions that we have made to the business sector.

The vast majority of the people of this country - many of them poor and needy - pay the vast amount of tax through indirect taxation on imports. It is not right that they should carry the most wealthy in our society.

It is my hope that those who wrote to me and who are "agitated and vexed" will appreciate the benefits they enjoy in our society and agree to pay their fair share.

Thank you for listening and may God bless us all.