On Monday 8 February, Premier and Minister for Finance Dr. the Hon. D. Orlando Smith presented the 2016 budget forecasting revenue in the region of $330,846,500.00: a sum that is larger than the annual revenue of the past years. The BVI Leader also announced recurrent expenditure in the region of $286,512,400.
For 2016, the Honourable Minister for Finance disclosed that there will be a recurrent surplus of $29,334,000, and mentioned that Government is expected to meet 2016 debt service obligations on its existing loans to the tune of $12,484,000.
Premier Smith said that this year his government hopes to contribute $15,000,000 to the Reserve Fund, bringing it to $64,000,000, and in the process meet its requirement under the Protocols for Effective Financial Management by the end of the 2017 financial year.
Hon. Smith also mentioned that in 2015, Government engaged the United Kingdom Government in discussions with a view to grant leave to relax the previously agreed deadline to meet the 2015 reserves ratio agreed to in the Protocols for Effective Financial Management.
“We decided that this requirement could be extended to 2017 in order to facilitate an aggressive Capital Investment Program. The 2015 – 2017 Medium Term Fiscal Plan bears this out as does the 2016 – 2018 Medium Term Fiscal Plan,” Hon. Smith explained.
Government plans to fund much of its developmental projects from loans that were approved over the last two years, in addition to some funding from the Consolidated Fund. These funds amount to $21,100,000 and $20,550,000, respectively.
Dr. Smith announced that the projected revenue for 2016 will marginally cover expenditure, and he explained that this “mere cursory look at the Territory’s Medium Term Fiscal Plan demonstrates that this is as a result of a growing society with growing demands.” Among the examples of growing demands was works commissioned by government to repair and build infrastructure.
In highlighting the reported hardships, Hon. Smith said that 2016, represents a shift from the expectation that there will always be a windfall that will provide for unplanned events, but he said that Government must now plan very carefully.
The Premier noted that public demands and the demands of visitors and the international regulatory community have grown. This means that new revenue sources are needed to handle the Territory’s commitments and obligations. “We have to change our old way of doing things if we are to survive,” Dr. Smith said.
The Premier said that 2016 is expected to be a conservative year; but he promised that 2017 and 2018 will get progressively better, as various measures that government is taking to raise revenue begin to take effect. For now, Premier Smith indicated that government has decided that there will be an increase in taxes and fees: “Madame Speaker, in view of the relative levels of taxes and fees that we now pay, some of which have remained at the same levels for the last several decades, we have, after much contemplation and assessment, decided to augment the following fees and taxes in 2016,” Hon. Smith said.
The Minister for Finance said that government will change the current Work Permit structure to be more aligned with fees charged in other Overseas Territories. He said that government also plans to reverse the charging of import duties on the FOB rather than the CIF value; and that there are plans to change water rates to be more closely aligned with the cost of purchasing and distributing water.
Additionally, Hon. Smith said that government will continue a more aggressive approach to the collection of current taxes, fees and arrears, by reviewing current legislation to give revenue collecting agencies greater authority to enforce compliance.
He also noted that there are other revenue raising measures that that he did not indicate in the budget address, but will expound on in another forum, as he stressed that the aim for government is to raise $20.5M in additional revenue in 2016.
The Premier said that in addition to the measures instituted in 2016, in 2017 Government expects to adopt a modern, more progressive payroll tax system to promote equity while maintaining the simplicity of the current tax structure.
He said that this administration will also introduce innovations to tax collection methods, thereby improving efficiency and reducing the costs associated with collections; and also review and revise the current stamp duty regime.
“Our expectations are, that in combination with the measures taken, we are projecting total additional revenue of $26.2M,” Premier Smith announced.
Government also plans to introduce an environmental levy and to harmonise the existing fee and tax structure for hotels and yachts. There are plans to also review and revise the current marine fees structure by consolidating existing fees and creating a collection system.
“To be clear, Madame Speaker, these figures represent an additional intake that is forecasted over what we would have otherwise received without the revenue measures,” the Premier added.