Government Seeking Flat Tax; Income Tax Exemption Threshold Up by 20% in the Interim

Roseau, Dominica — Dominica’s Government has announced that it intends to simplify its tax system with only one rate of income tax. The announcement was made by Prime Minister and Minister for Finance, the Honourable Roosevelt Skerrit during his 2017/2018 Budget Address. In the interim, the Government has announced an increase in the income tax exemption threshold by 20% effective January 1, 2018.

The Prime Minister described the move as “major,” and, “bold”.

“Madam Speaker for us to achieve the bold vision enunciated in this presentation, we must have a tax system that incentivises employment over consumption, and income over idle assets. Consequently, Madam Speaker, we shall be directing the National Fiscal Policy Panel to consider and advise on the abolition of the 15% and 25% income tax bands as early as the next fiscal year. Under this proposed system, Dominicans would only start paying income tax when their income reaches the 35% tax rate,” the Prime Minister stated.

PM Skerrit said the measure would remove from the payment of income tax, “all Dominicans earning less than what can be termed a decent middle income salary”. He said that the National Fiscal Policy Panel would be charged with the responsibility of advising on this measure and that he hoped to be in a position as of the next fiscal year, to gradually introduce the new income tax structure.

“We shall await the advice of the experts, but in the interim I wish to ease the burden further and enhance the cash flow of workers in Dominica, by increasing the minimum income tax threshold from $25,000 per year to $30,000 per year,” the PM further stated. This means that the first $30,000 earned during the year would be exempt of any future income tax from January 1, 2018.

The Prime Minister explained that the revenue foregone would represent less than 5% of current revenues. He said, “There will be those who will consider that 5% of revenues will be recovered through the expansion of our economy, but we will conservatively assume not and instead we would moderate our other discretionary expenditures within the fiscal year in order to maintain a near zero primary balance in our fiscal accounts. This measure is not being funded by debt.”

Related: Watch this excerpt of his Budget Address (https://youtu.be/5VliCBi11Oc)