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

The The AAntigua and ntigua and BBarbuda arbuda SSales ales TTaxax

ABSTABST

Not an Additional Tax but Part of the Reformed Tax System

The History of Value Added The History of Value Added Tax (VAT)Tax (VAT) France 1948France 1948 Brazil 1967Brazil 1967 Expands to 63 countries between Expands to 63 countries between

1970/801970/80 Currently 136 countries have a VATCurrently 136 countries have a VAT

The VAT todayThe VAT today

4 billion people pay VAT (70% of world 4 billion people pay VAT (70% of world population)population)

Annual VAT revenues are more than US$18 Annual VAT revenues are more than US$18 trilliontrillion

25% of annual total tax revenue 25% of annual total tax revenue VAT has replaced retail sales and other taxesVAT has replaced retail sales and other taxes Denmark (25%)Denmark (25%) Nigeria, Panama, Taiwan, Singapore (5%)Nigeria, Panama, Taiwan, Singapore (5%)

VAT presence in the VAT presence in the CaribbeanCaribbean In operationIn operation– Barbados, Dominican Republic, Barbados, Dominican Republic,

Haiti, Jamaica, and Trinidad & Haiti, Jamaica, and Trinidad & TobagoTobago

Being introducedBeing introduced– Dominica, Antigua and Dominica, Antigua and

Barbuda, Guyana, St. Lucia and Barbuda, Guyana, St. Lucia and St. Vincent and the GrenadinesSt. Vincent and the Grenadines

Being re-introducedBeing re-introduced– Belize and GrenadaBelize and Grenada

The ABSTThe ABST

A Value Added Tax-type consumption taxA Value Added Tax-type consumption tax

A broad-based tax onA broad-based tax on consumptionconsumption

A tax on supplies (goods and services)A tax on supplies (goods and services)

A multi-stage transaction taxA multi-stage transaction tax

Will begin with a high threshold Will begin with a high threshold

Only a small number of registrants initiallyOnly a small number of registrants initially

Registrants and Customs will charge the ABST Registrants and Customs will charge the ABST on behalf of the government on behalf of the government

Registrants will off-set ABST paid on purchases Registrants will off-set ABST paid on purchases and other costs against ABST charged on salesand other costs against ABST charged on sales

Why ABSTWhy ABSTOECS Reform Commission recommended a VAT OECS Reform Commission recommended a VAT for member countries as part of general tax for member countries as part of general tax reform programme reform programme

Consistent with international and WTO rulings Consistent with international and WTO rulings regarding the elimination of consumption taxes regarding the elimination of consumption taxes (Customs service tax?) (Customs service tax?)

Universal application (everyone pays)Universal application (everyone pays)

Introduction of the ABST is a good opportunity to Introduction of the ABST is a good opportunity to revamp Inland Revenue and Customs revamp Inland Revenue and Customs administrationsadministrations

Not a New Tax but Part of a Reformed Tax SystemNot a New Tax but Part of a Reformed Tax System

Economic ImplicationsEconomic Implications

Expected to deliver long term economic Expected to deliver long term economic improvements improvements

Will help facilitate Antigua and Barbuda’s Will help facilitate Antigua and Barbuda’s transition to the FTAA transition to the FTAA

Replacement of multi rated consumption tax Replacement of multi rated consumption tax with single rated tax on domestic and imported with single rated tax on domestic and imported goodsgoods

Most prices for goods should remain relatively Most prices for goods should remain relatively stablestable

Services will be subject to ABSTServices will be subject to ABST

ABST Revenue Impact (annual)ABST Revenue Impact (annual)

The largest suppliersThe largest suppliersLarge turnover Large turnover A lower threshold of for hotels and A lower threshold of for hotels and restaurants restaurants Revenue raised $157mRevenue raised $157mTaxes repealed Taxes repealed $120m$120m

Net ABST Net ABST RevenueRevenue $37m$37m

What will be subject to ABST?What will be subject to ABST?

The Government proposes an ABST on:The Government proposes an ABST on:

Imports into Antigua and Barbuda; andImports into Antigua and Barbuda; and

Most goods & services supplied in Antigua Most goods & services supplied in Antigua and Barbudaand Barbuda

Goods: Goods: physical objects such as furniture, physical objects such as furniture, clothing, appliances and including food clothing, appliances and including food products. products.

Services: Services: services such as those provided by services such as those provided by

lawyers, architects, plumbers, and mechanicslawyers, architects, plumbers, and mechanics

Taxes to be Replaced

Consumption tax

Telecommunications tax

Restaurant and catering services tax

Hotel (bed-night) tax

Hotel guest tax

Hotel guest levy

Supplies not Subject to ABSTSupplies not Subject to ABST

Zero rated supplies (exempt with credit)Zero rated supplies (exempt with credit)

No ABST on sales but refunds available for No ABST on sales but refunds available for ABST paid on inputsABST paid on inputs

Usually exports Usually exports

Exempt supplies (exempt without credit)Exempt supplies (exempt without credit)

No ABST on sales but no refunds of ABST No ABST on sales but no refunds of ABST paid on inputspaid on inputs

Supplies not subject to ABSTSupplies not subject to ABSTItems 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

Supplies not subject to ABSTSupplies not subject to ABST

The basic charge for water and electricity Textbooks approved by the Ministry of Education Day care servicesTransportation of passengers by land or by ferry between Antigua and BarbudaFinancial services International transport servicesThe services of funeral directors and undertakers

Basic Basket of GoodsBasic Basket of Goods

Macaroni Macaroni Chicken Chicken MackerelMackerel

Salt FishSalt Fish OatsOats Local CatchLocal Catch

CheeseCheese Orange JuiceOrange Juice Cocoa Cocoa

ToothpasteToothpaste Soap PowderSoap Powder Toilet PaperToilet Paper

CrackersCrackers SodaSoda EggsEggs

Baby WipesBaby Wipes Ling FishLing Fish Infant FormulaInfant Formula

Basic Basket of GoodsBasic Basket of Goods

Peas & Beans Peas & Beans Tea Tea Red HerringRed Herring

TunaTuna CerealCereal BiscuitsBiscuits

Luncheon MeatLuncheon Meat Black PepperBlack Pepper Insecticides Insecticides

Mosquito CoilMosquito Coil MaltMalt CornmealCornmeal

RiceRice FlourFlour SugarSugar

MilkMilk SaltSalt ButterButter

Basic Basket of GoodsBasic Basket of Goods

Margarine Margarine Corn MealCorn Meal Refined Edible OilRefined Edible Oil

TunaTuna CerealCereal BiscuitsBiscuits

SoapSoap Petroleum Petroleum ProductsProducts

Pharmaceutical Pharmaceutical Goods Goods

Effect of ABST on PricesEffect of ABST on PricesBasic basket of goods will not be subject to Basic basket of goods will not be subject to ABSTABSTABST rate will be around 15%ABST rate will be around 15%Current rate for consumption tax on most Current rate for consumption tax on most goods is between 5% and 50%goods is between 5% and 50%Prices for many goods should remain relatively Prices for many goods should remain relatively stable stable Consumption tax is hiddenConsumption tax is hiddenABST is visible ABST is visible Prices for taxable services should rise slightly Prices for taxable services should rise slightly with ABSTwith ABSTPrices quoted will be ABST inclusivePrices quoted will be ABST inclusive

Who Will be Registered?Who Will be Registered?

Business with the largest annual turnover Business with the largest annual turnover (supply of both goods and services)(supply of both goods and services)Many (not all) hotels and restaurantsMany (not all) hotels and restaurantsAdministrative capacity of IRD continues Administrative capacity of IRD continues to increase and registration threshold will to increase and registration threshold will be lowered to include most businessesbe lowered to include most businessesRemember registered businesses will Remember registered businesses will charge the ABST to consumers and charge the ABST to consumers and recover the ABST they pay in the recover the ABST they pay in the production of the goods and servicesproduction of the goods and services

Collection & returnsCollection & returns

Monthly ABST returnsMonthly ABST returns

ABST payable = ABST charged – ABST paidABST payable = ABST charged – ABST paid

Net amount is paid to the Commissioner Net amount is paid to the Commissioner IRDIRD

** No credits for input tax unless registrant has No credits for input tax unless registrant has an ABST invoice issued by the supplieran ABST invoice issued by the supplier

ABST payable on imports is paid to the ABST payable on imports is paid to the Comptroller of Customs at time of importComptroller of Customs at time of import

Documentation RequirementsDocumentation Requirements

A registered supplier will be required to:A registered supplier will be required to:

display ABST registration certificate at places of businessdisplay ABST registration certificate at places of business

issue ABST invoices for taxable supplies to other issue ABST invoices for taxable supplies to other

registered personsregistered persons

issue sales receipts showing ABST paid on taxable issue sales receipts showing ABST paid on taxable

supplies to unregistered personssupplies to unregistered persons

advertise prices as ABST-inclusive advertise prices as ABST-inclusive

final price will break down original price + ABST to equal final price will break down original price + ABST to equal

final price final price

Registered vs Non Registered Registered vs Non Registered PricesPrices

Registered will charge ABSTRegistered will charge ABST

Non Registered will not charge ABSTNon Registered will not charge ABST

Registered will receive credit for ABST Registered will receive credit for ABST paidpaid

Non Registered will not receive creditNon Registered will not receive credit

Registered can negotiate better pricesRegistered can negotiate better prices

Historically registered price per item is Historically registered price per item is similar to non registeredsimilar to non registered

ABST Payments/RefundsABST Payments/Refunds

Tax period is one calendar monthTax period is one calendar month

Net ABST payable 21 days after tax periodNet ABST payable 21 days after tax period

ABST on imports payable at time of import ABST on imports payable at time of import to the Comptroller of Customsto the Comptroller of Customs

Negative balances will be refundable if an Negative balances will be refundable if an amount remains after offsetting against amount remains after offsetting against next 6 tax periodsnext 6 tax periods

Exporters can claim refunds without Exporters can claim refunds without carrying forward into future monthscarrying forward into future months

Who will pay the ABST?Who will pay the ABST?

The ABST will be The ABST will be paid by paid by

consumers… consumers…

not by suppliers!!!not by suppliers!!!

Decisions Under ConsiderationDecisions Under ConsiderationRegistration thresholdRegistration threshold

ABST rateABST rate

Implementation dateImplementation date

Transition rulesTransition rules

Zero rated supplies (exempt with credit-Zero rated supplies (exempt with credit-exporters)exporters)

No ABST on sales but refunds available for ABST No ABST on sales but refunds available for ABST paid on inputs paid on inputs

Exempt supplies (exempt without credit)Exempt supplies (exempt without credit)

No ABST on sales but no refunds of ABST paid on No ABST on sales but no refunds of ABST paid on inputsinputs

Lead up to ABST ImplementationLead up to ABST ImplementationLegislation amended, finalized and passed Legislation amended, finalized and passed IRD will assist in registration processIRD will assist in registration process

Identification of registrantsIdentification of registrantsCompletion of registration forms Completion of registration forms Delivery of registration certificatesDelivery of registration certificates

IRD will continue the education campaignIRD will continue the education campaignPamphlets and brochures to be issued shortlyPamphlets and brochures to be issued shortly

Registrants should run down inventory to avoid (as Registrants should run down inventory to avoid (as much as possible) the application of consumption tax much as possible) the application of consumption tax and ABST to supplies in post implementation periodand ABST to supplies in post implementation periodPrices must be advertised as “ABST” inclusivePrices must be advertised as “ABST” inclusiveCash registers re-programmed to break down ABST as Cash registers re-programmed to break down ABST as part of the pricepart of the priceMaintain a controlled supply of ABST invoices for sales Maintain a controlled supply of ABST invoices for sales to registrants to registrants

Concluding RemarksConcluding RemarksABST White Paper and proposed draft legislation launched September 16White paper, legislation and ABST presentations available on antigua.ab.gov.agConsultation sessions will continueImplementation plan developed and executed in other jurisdictions and is being used as foundation for ABST introductionLocal resources for implementation have been made availableInternational/regional assistance has been made available (technical and IT)Adequate lead time to ensure successful implementation