In a Budget Address that centred on people-centric growth and bringing relief to Saint Lucians, Prime Minister Allen Michael Chastanet announced Personal Income Tax Reform that would see thousands of low income earners pay less and in some cases no personal income taxes.
This is a bold initiative and in keeping with the Government’s promise of less onerous taxes on the people of Saint Lucia.
During his presentation to the House of Assembly on Monday April 15th 2019, the Prime Minister explained the challenges and disadvantages of the current system, among them: the burdensome filing of a number of documents; many individuals find the tax computation complicated with the four tax bands and four tax rates; the system is not sufficiently progressive, as the greatest burden of taxation does not always fall on the higher income earners.
The Prime Minister explained that the new regime seeks to provide income tax relief to lower income earners.
Upon implementation effective January 1st 2020, the personal allowance will be increased from $18,000 to $23,000, meaning that for an average income earner, the first $23,000 of annual income will be tax free.
There will now be three tax bands instead of four. The first $0 to $10,000 of chargeable income will be taxed at a rate of 10%, $10,001 to $20,000 will be taxed at a tax rate of 20% and the remaining amounts above $20,000 will be taxed at a tax rate of 30%.
The new regime will limit the amount of total deductions that can be claimed up to a maximum or cap of $25,000 in any given year and restricts the number of allowable deductions to housing deductions, future & financial benefits, medical deductions and child and education benefits.
The new tax regime has been welcomed by tax consultant Mr Frank Myers.
Prime Minister Chastanet further noted that pensioners andpersons 60 years and over, will not pay any tax on the first $31,000 of their income compared to $24,000 under the current regime.