Housing and Social Development Levy increases
BASSETERRE, St. Kitts – IN his more than three-hour 2011 Budget presentation yesterday (Dec. 14), Prime Minister and Minister of Finance Dr. Denzil Douglas announced in the National House of Assembly that with effect from January 1, 2011 consumers would have to pay more for electricity.
Dr. Douglas indicated that the global recession has forced countries the world over to tighten their fiscal stances and strengthen public finances in an effort to reduce the risk of crises.
From this backdrop, the seemingly rigorously binding Budget indicates that the government, in its reformation plans, intends to be much more prudent in its expenditure; therefore, revenue collection is a top priority.
Dr. Douglas said in order to mitigate the risks of the global financial economic crises, his government had decided to implement a number of fiscal measures, and the first one is the revision of the electricity tariffs.
He noted that the government annually subsidises the cost of electricity to the tune of EC$48M under the current tariff, and that there is no justification for his administration to continue to provide broad-based subsidies on the cost of any utility, especially for those who could afford to pay for these services.
“The new tariff which will come into effect from January 1, 2011 will bring the base tariff closer to the cost of producing electricity. It is important that we do this prior to the scheduled corporatisation in order to ensure the success of the corporatised entity. We are determined that this new entity must at least break even. We do not expect to provide any subvention to the Electricity Corporation; hence we are proposing that the subsidy must be eliminated now.
“Under the new tariff structure the tariff will increase by 27¢, 30¢ and 31¢ respectively for the three KWH ranges for domestic rates, and will increase by 30¢, 33¢, 35¢, 37¢ respectively in the four KWH ranges for commercial consumption. The new tariff will be implemented in January 2011 and the corporatisation of the Electricity Department should be concluded by April 30, 2011,” Dr. Douglas said.
This means that from January 1, 2011 the three ranges for domestic rates will be 59¢, 65¢ and 68¢ respectively, while the four ranges for commercial consumption will be 73¢, 74¢, 74¢ and 72¢ respectively.
The Finance Minister also announced that there would be an increase in the Housing and Social Development Levy, which is deducted from workers’ salaries and collected by the Social Security Board on behalf of the government.
He declared that his government had received technical assistance from the Caribbean Regional Technical Assistance centre in reviewing the Housing and Social Development Levy, as well as the Federation’s tax concessions system.
Dr. Douglas pointed out that the Ministry of Finance had studied the report and decided on a number of measures that would be implemented in 2011.
“In the proposed measure, the tiers will remain the same; that is, the money amounts. Employers will continue to contribute three percent for each tier, and tier one employees will continue to be exempted from the Levy. However, tier two employees will contribute 3.5 percent now, instead of the three percent that has been operating under the former PAM administration as well.
“Tier three employees…10 percent, instead of the eight percent, will be paid. Remember, in all of this, the employer still pays three percent. It is the employee who makes an adjustment in his contribution. So tier three employees will adjust from eight percent to 10 percent, and the tier four employees will also adjust from 10 percent to 12 percent,” Dr. Douglas said.
He also said that very early in 2011 the legislative amendment would go before the House and he is looking forward to members on the opposition benches supporting it.
