Government Senators Explain Amendment to rates on Income and Business Tax

Eamon Courtenay

During the morning session on Wednesday’s Senate’s Budget debate, U.D.P.’s Orson Elrington was sworn in as a temporary senator, in place of Senator Mike Peyrefitte. Leader of Government Business, Senators Eamon Courtenay, and Senator Christopher Coye rose to speak on the proposed amendment to the rates of taxes on the Ninth Schedule of the Income and Business Tax. Coye explained that the three percent increase on the business tax is on the net interest income of banks and financial institutions, that is their interest income minus their interest expenses.

Senator Eamon Courtenay, Leader of Government Business
“In the urgent context of incentivizing increased bank lending, the National Assembly approves that the Government adjusts the rates of tax on receipts, prescribed in the Ninth Schedule of receipts as proposed in the attached annex. Foreign exchange earning sectors including tourism, agriculture, and business process outsourcing – the rate will move from fifteen percent to twelve percent. Real estate, building, construction and manufacturing remain at fifteen percent. Personal loans – the rate will move from fifteen percent to eighteen percent; in the distribution sector the rates will move from fifteen percent to seventeen percent; and other loans, the rate will move from fifteen percent to sixteen percent.”

Christopher Coye

Senator Christopher Coye, Minister of State
“Our banking system has certainly been affected by the experience of the COVID pandemic. Banks have taken different approaches. Some banks have relied on forbearance measures. In fact, all banks and financial institutions have relied to some extent on forbearance measures. At the same time, lending policies have varied across the financial institutions. We at the same time have to have regard to our foreign exchange position, our foreign reserves. What we have highlighted is that foreign reserves have certainly increased significantly over the past year and a half, and we are in a much better position now than we were before. At the same time, as we project forward, into the next two to three years, we do note and the I.M.F. themselves spoke specifically to it in their last report, that our foreign reserves position is expected to decline, that we will have a downward trajectory. We had built up quite a bit of external official debt, but a lot of that debt had grace periods. The amortization will come into effect in the next couple of years, and in the Blue Bond transaction, we will also have a heightened cost in the next couple of years as the interest rate adjusts. So, we do expect that the foreign reserves position will be impacted, so it’s important for us to act in a proactive way to incentivize lending in foreign exchange-earning sectors and at the same time, disincentivize lendings that are import-intensive and drain our foreign exchange.”