Barbadians earning more than $6,250 per month and businesses that emerged from the COVID-19 pandemic largely unscathed will have to contribute to the $1 billion bill for Government’s COVID-19 fight.
Prime Minister Mia Mottley said the “one-off” payments, which are expected to raise a total of $120 million, would be taken as a pandemic contribution levy of one per cent of an individual’s income every month for a year; while businesses in the telecommunications, commercial banking and general and life insurance sectors, and the retail of petroleum products, will pay 15 per cent of their net income over an eight-month period.
The tax for workers with earnings over the threshold will take effect from April 1.
“Where an individual receives an income of more than $6,250 per month or $75,000 per year, the individual shall contribute one per cent of his monthly earnings as a pandemic contribution levy on his income for only 12 months… We estimate that this levy will raise just about $15 million over the course of the 12 months,” the Prime Minister said.
“I know no one enjoys paying taxes, even when they are one-off taxes but we have come through the night by sharing the burden and sharing the benefits.
This nation, therefore, thanks those who will now step up to the plate and contribute because we must do this together as one. As we share the burden, we share the benefits.”
Further identifying operations in the telecoms, insurance and finance sectors as those that recorded higher net incomes in 2020 and 2021 amid the COVID-19 pandemic, and benefitted from a reduced corporate tax rate, Mottley said they would also have to contribute.
“We ask those sectors that remain largely unscathed in 2020 and 2021 to make a one-off contribution to the Herculean efforts expended to hold our society together during the two years of the COVID pandemic,” she said.
“Those sectors benefited from that public support indirectly, and sometimes directly, while they also benefitted from COVID not impacting their businesses to the point where the very foundation of their businesses would have been destroyed.”
Prime Minister Mottley said the levy on corporate profits in the identified sectors would be a “modest contribution”, noting that businesses would keep 85 per cent of their profits in their pockets.
“Where a company with a net income above $5 million in 2020 and 2021 is carrying on domestic business in the telecommunications sector, in the retail sale of petroleum products by dealers, in the commercial banking sector – so deposit-taking and finance houses are there but we exclude credit unions – and in general and life insurance business, then these companies shall be subject to a pandemic contribution levy of 15 per cent of their net income for the company’s financial statements for fiscal years ending March 2021 and 2022.
The pandemic contribution levy for the two fiscal years is payable to the Barbados Revenue Authority in eight monthly payments, from July 15.
“The levy in respect of the fiscal year ended 2021 is due in the July to October 2022 period and the levy in respect of the fiscal year ended 2022 is due in the period November 2022 to February 2023. This levy will only be in place for the period up until March 2023,” Mottley explained.
“It is estimated that this levy will raise approximately $105 million or approximately just over 10 per cent of what it cost the Government of Barbados to fight COVID.”
The levy will not be deductible for tax purposes for either individuals or businesses. (DP)
