Budget helping low income earners face rising prices

AccouNting firm, Ernst & Young, said measures to address the rise in prices while specific to a few items of foodstuff will “still go a long way to alleviate the hardship of lower income earners.” In the Budget last week, Prime Minister Patrick Manning said the surcharge on chicken and turkey parts will be reduced from 85 percent to 40 percent effective November 1, 2004. If the desired effect on prices is not achieved a further reduction would be implemented, he said. Also,the removal of the Common External Tariff (CET), on powdered milk, split peas, black eye beans and cheese, should help alleviate poverty among poorer sections of the population. Brown sugar, cocoa powder, coffee, mauby and orange juice will be zero rated.

The increase in the minimum wage from from $8 to $9 effective January 1, 2005, “will impact on small businesses and businesses operating on small profit margins,” Ernst &Young has said. The removal of the business levy from registered small business, while welcome, may not have a significant impact in giving relief though. The effect of the increase in Personal Allowance will assist persons earning $2,500 per monthly or less by saving them approximately $104 per month. Persons earning in excess of $30,000 will save even less. On losses from sources other than from any trade, business or farming, such as income from rentals, the firm said there appears to be a view that there has been abuse of the use of losses from other sources of income against employment income. hence the need to restrict the use of such losses.

On extending taxation of benefits include persons employed by schools or other educational establishments and charities, the firm said this measure was introduced on the basis that there was no justification for the favourable treatment of such employees. On amending the Corporation Tax Act to allow companies to claim deductions in respect of one-year deeds of covenant, it was noted that the practice by the Board of Inland Revenue of approving one-year deeds of covenant was inconsistent with the legislation. On the application of Value Added Tax Refunds to other Liabilities, the accounting firm said that while the Board of Inland Revenue will be given the power to off-set a VAT refund against any other tax liability at their discretion, there is no mechanism for a person to have a current tax liability set-off against a refund due.

Other
Measures
Relief to recipients of pensions and Public Assistance

The Minister proposes to increase old age pension from $1,000 per month to $1,150. Also that public assistance be increased by $150 per month, and to increase the level of disability assistance grants from $650 per month to $800 per month. This measure takes effect October 1, 2004.

E&Y

Given the steady increase in the cost of living this is welcome.

Public Service Pensions

Ex-gratia awards are contemplated for retired public officers and will vary with the length of time they have been retired. Officers who retired on or before December 31, 1984 will receive $400. Officers whose retirement fell between January 1, 1985 and December 31, 1994 will qualify for $300 per month and those retiring between January 1, 1995 and December 31, 1999, $150. Widows of retired officers will receive $150. This measure comes into effect from October 1, 2004.

E&Y

Pensioners face rising costs on almost all necessary items and therefore such a measure can only help.

Application of Sport Allowance to Petroleum Companies

It is proposed to extend the 150 percent allowance received under the Corporation Tax Act to the Petroleum Taxes Act by amending Section 18 of that Act. This measure takes effect from January 1, 2003.

E&Y

This measure seeks to correct an omission in previous legislation.