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

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

3. The VAT today 4 billion people pay VAT (70% of world population) 4 billion people pay VAT (70% of world population) Annual VAT revenues are more than US$18 trillion Annual VAT revenues are more than US$18 trillion 25% of annual total tax revenue 25% of annual total tax revenue VAT has replaced retail sales and other taxes VAT has replaced retail sales and other taxes Denmark (25%) Denmark (25%) Nigeria, Panama, Taiwan, Singapore (5%) 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 on consumption 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The largest suppliers Large turnover A lower threshold of for hotels and restaurants Revenue raised $157m Taxes repealed $120m Net ABST Revenue$37m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 Imports into Antigua and Barbuda; and Most goods & services supplied in Antigua and Barbuda 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 Macaroni MacaroniChickenMackerel Salt Fish Oats Local Catch Cheese Orange Juice Cocoa Toothpaste Soap Powder Toilet Paper CrackersSodaEggs Baby Wipes Ling Fish Infant Formula

15. Basic Basket of Goods Peas & Beans Peas & BeansTea Red Herring TunaCerealBiscuits Luncheon Meat Black Pepper Insecticides Mosquito Coil MaltCornmeal RiceFlourSugar MilkSaltButter

16. Basic Basket of Goods Margarine Corn Meal Refined Edible Oil TunaCerealBiscuits Soap Petroleum Products Pharmaceutical 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