The recommendations are contained in a report to the cabinet from the Tax and Revenue Reform and Modernization Commission appointed by that was endorsed by the government’s top leadership. “Now the real work begins,” said Finance Assistant Secretary Bruce Bilimon on Wednesday in reference to developing policy recommendations, public awareness and training.
The aim is for the new tax plan to be implemented in 2012. “We are not rushing it because it’s a big step,” said Ading of the new tax plan.
The plan needs to be approved by parliament, the Ministry of Finance’s tax collection staff has to be trained, and public awareness raised, Ading said. “It will take a while,” he said.
The tax commission, which included private sector and government officials, said the plan is not to create tax increases to existing taxpayers as a group.
Key points for the new tax structure:
• Income tax: People earning below $4,160 a year will see all their income become tax-free. Currently, the maximum income tax is limited to 12 percent on income above $10,401. Under the plan, any income over $20,800 will be taxed at 16 percent.
• Business net profit tax: Gross revenue tax will be replaced by a net income tax on revenues above $100,000 a year or for professionals grossing less than $100,000 annually. The tax rate is estimated to be 20 percent.
Businesses with gross revenue under $10,000 a year will pay a flat rate tax, while those in the $10,000 to $100,000 range will see two tax rates: three percent for trading companies, six percent for business providing services.
• Consumption tax: standard import duties, local government sales tax, hotel and resort tax will be replaced with a “consumption tax” of 10 percent that will be collected at the first point of sale.
• Excise taxes: The existing import duties on alcohol, tobacco, motor vehicles and fuels will be replaced with excise taxes.
“The new system needs to be fair, benefit low-income families and be user friendly,” Adding said.
