Payroll Tax: Audley Maduro urges new equitable revision

CCHA is appealing to the Government to revisit the whole issue of the newly announced Payroll Tax, “in view of the devastating effect it could have on businesses in the Territory”. CCHA members, which include businesses in the finance sector, land development and construction companies, retailers, as well as the tourism industry, voiced their severe concerns at specially held meetings last week, over the negative effect the new tax could have on employment levels at companies already struggling to survive.

“The CCHA recognizes that the BVI Government to safeguard the offshore industry has no choice but to comply with the pressures being brought to bear by both the OECD and the EU to eliminate onshore taxation by January 1 2005,” said Mr. Audley Maduro.

“However, we would have welcomed the opportunity, before rather than after the fact, to put forth our recommendations on this very crucial issue affecting all working individuals in the Territory, and we strongly urge the Government to carefully examine the pros and cons of any substitute form of tax, both on our local residents as well as on visitors to the territory.  It needs to be equitable, and not adversely burden any particular stakeholder in the Territory.”

In an effort to create a more equitable balance among employees and employers and at the same time meet the projected financial objectives of the Government of the Virgin Islands, the Chamber of Commerce and Hotel Association hereby recommends that:

The regressive flat tax of 8% for employees be amended to reflect a more equitable and progressive form of contribution by introducing a tier structure as noted below.  This amendment would not only meet the Government’s financial objectives but would allow higher income earners to make a more representative contribution to the maintenance and development of the Territory.

The universal principle of small, medium and large be adopted within the payroll system for employers and employees, and a new category for medium sized businesses be introduced.  Also deductible sums for employers should increase based on the number of employees (fulltime and part-time) within the business, as follows:

The gratuities paid to or received by employees remain tax-exempt.

The employer tax returns to Government be made on a quarterly basis.

The Cruise Ship passenger head tax be increased to $10.00, and that the increased sum be used for environment and education purposes.

The tax credit system be seriously considered and implemented for businesses that invest in education, health and the environment.

There needs to be mechanism available to all businesses that can demonstrate that they have suffered a trading loss before depreciation, due to factors outside of their control.

 In closing Mr. Maduro stressed the need for the public to be fully informed of the new requirements (whatever form they end up taking), and for the appropriate education to be provided.

Mr. Maduro closed by saying: “News of the impending tax reform has already reached the outside world, including being reported on CNN.  Potential investors in the BVI may not find our new tax regulations attractive and may go elsewhere – to one of our competitors in the Caribbean.”