The A ntigua and B arbuda S ales T ax ABST

1. The Antigua and Barbuda Sales TaxABST Not an Additional Tax but Part of the Reformed Tax System

2. France 1948 Brazil 1967 Expands to 63 countries between 1970/80 Currently 136 countries have a VAT The History of Value Added Tax (VAT)

3. The VAT today • 4 billion people pay VAT (70% of world population) • Annual VAT revenues are more than US$18 trillion • 25% of annual total tax revenue • VAT has replaced retail sales and other taxes • Denmark (25%) • Nigeria, Panama, Taiwan, Singapore (5%)

4. VAT presence in the Caribbean • In operation • Barbados, Dominican Republic, Haiti, Jamaica, and Trinidad & Tobago • Being introduced • Dominica, Antigua and Barbuda, Guyana, St. Lucia and St. Vincent and the Grenadines • Being re-introduced • Belize and Grenada

5. The ABST • A Value Added Tax-type consumption tax • A broad-based tax onconsumption • A tax on supplies (goods and services) • A multi-stage transaction tax • Will begin with a high threshold • Only a small number of registrants initially • Registrants and Customs will charge the ABST on behalf of the government • Registrants will off-set ABST paid on purchases and other costs against ABST charged on sales

6. Why ABST • OECS Reform Commission recommended a VAT for member countries as part of general tax reform programme • Consistent with international and WTO rulings regarding the elimination of consumption taxes (Customs service tax?) • Universal application (everyone pays) • Introduction of the ABST is a good opportunity to revamp Inland Revenue and Customs administrations • Not a New Tax but Part of a Reformed Tax System

7. Economic Implications • Expected to deliver long term economic improvements • Will help facilitate Antigua and Barbuda’s transition to the FTAA • Replacement of multi rated consumption tax with single rated tax on domestic and imported goods • Most prices for goods should remain relatively stable • Services will be subject to ABST

8. ABST Revenue Impact (annual) • The largest suppliers • Large turnover • A lower threshold of for hotels and restaurants • Revenue raised $157m • Taxes repealed $120m Net ABST Revenue $37m

9. What will be subject to ABST? • The Government proposes an ABST on: • Imports into Antigua and Barbuda; and • Most goods & services supplied in Antigua and Barbuda • Goods: physical objects such as furniture, clothing, appliances and including food products. • Services: services such as those provided by lawyers, architects, plumbers, and mechanics

10. Taxes to be Replaced • Consumption tax • Telecommunications tax • Restaurant and catering services tax • Hotel (bed-night) tax • Hotel guest tax • Hotel guest levy

11. Supplies not Subject to ABST • Zero rated supplies (exempt with credit) • No ABST on sales but refunds available for ABST paid on inputs • Usually exports • Exempt supplies (exempt without credit) • No ABST on sales but no refunds of ABST paid on inputs

12. Supplies not subject to ABST • Items included in the basic basket of goods • Medical services including dental, optical and veterinary services • Drugs and medicines sold in pharmacies and medical centres • Services provided in nursing homes for persons who need permanent care • Educational services including both private and state provided education • Residential rents and sale of residential real property

13. Supplies not subject to ABST • The basic charge for water and electricity • Textbooks approved by the Ministry of Education • Day care services • Transportation of passengers by land or by ferry between Antigua and Barbuda • Financial services • International transport services • The services of funeral directors and undertakers

14. Basic Basket of Goods

15. Basic Basket of Goods

16. Basic Basket of Goods

17. Effect of ABST on Prices • Basic basket of goods will not be subject to ABST • ABST rate will be around 15% • Current rate for consumption tax on most goods is between 5% and 50% • Prices for many goods should remain relatively stable • Consumption tax is hidden • ABST is visible • Prices for taxable services should rise slightly with ABST • Prices quoted will be ABST inclusive

18. Who Will be Registered? • Business with the largest annual turnover (supply of both goods and services) • Many (not all) hotels and restaurants • Administrative capacity of IRD continues to increase and registration threshold will be lowered to include most businesses • Remember registered businesses will charge the ABST to consumers and recover the ABST they pay in the production of the goods and services

19. Collection & returns • Monthly ABST returns • ABST payable = ABST charged – ABST paid • Net amount is paid to the Commissioner IRD * No credits for input tax unless registrant has an ABST invoice issued by the supplier • ABST payable on imports is paid to the Comptroller of Customs at time of import

20. Documentation Requirements A registered supplier will be required to: • display ABST registration certificate at places of business • issue ABST invoices for taxable supplies to other registered persons • issue sales receipts showing ABST paid on taxable supplies to unregistered persons • advertise prices as ABST-inclusive • final price will break down original price + ABST to equal final price

21. Registered vs Non Registered Prices • Registered will charge ABST • Non Registered will not charge ABST • Registered will receive credit for ABST paid • Non Registered will not receive credit • Registered can negotiate better prices • Historically registered price per item is similar to non registered

22. ABST Payments/Refunds • Tax period is one calendar month • Net ABST payable 21 days after tax period • ABST on imports payable at time of import to the Comptroller of Customs • Negative balances will be refundable if an amount remains after offsetting against next 6 tax periods • Exporters can claim refunds without carrying forward into future months

23. Who will pay the ABST? The ABST will be paid by consumers… not by suppliers!!!

24. Decisions Under Consideration • Registration threshold • ABST rate • Implementation date • Transition rules • Zero rated supplies (exempt with credit-exporters) • No ABST on sales but refunds available for ABST paid on inputs • Exempt supplies (exempt without credit) • No ABST on sales but no refunds of ABST paid on inputs

25. Lead up to ABST Implementation • Legislation amended, finalized and passed • IRD will assist in registration process • Identification of registrants • Completion of registration forms • Delivery of registration certificates • IRD will continue the education campaign • Pamphlets and brochures to be issued shortly • Registrants should run down inventory to avoid (as much as possible) the application of consumption tax and ABST to supplies in post implementation period • Prices must be advertised as “ABST” inclusive • Cash registers re-programmed to break down ABST as part of the price • Maintain a controlled supply of ABST invoices for sales to registrants

26. Concluding Remarks • ABST White Paper and proposed draft legislation launched September 16 • White paper, legislation and ABST presentations available on antigua.ab.gov.ag • Consultation sessions will continue • Implementation plan developed and executed in other jurisdictions and is being used as foundation for ABST introduction • Local resources for implementation have been made available • International/regional assistance has been made available (technical and IT) • Adequate lead time to ensure successful implementation