Government set to lose EC$60.5 milion in revenue
Public sector salaries in St Vincent and the Grenadines are set to jump seven per cent over the next three years, but within “the boundary of our Fiscal Responsibility Framework”.
That’s the promise from Finance Minister Camillo Gonsalves, who disclosed that the Government and the public sector unions have agreed to a 2.5 per cent increase in 2023, two per cent in 2024 and 2.5 per cent in 2025. Further, the Government will increase the personal income tax threshold from EC$20,000 to EC$22,000 annually (costing EC$4.9 million in revenue) and will reduce corporate income tax from 30 per cent to 28 per cent.
The finance minister explained that the 2.5 per cent in 2023 will translate to EC$9.1 million. In 2024, this will translate to a two per cent increase will amount to EC$7.4 million and the 2.5 per cent in 2025 and will cost the government EC$9.4 million for a total of EC$25.9 million, which is just EC$1.1 million below the current monthly wage bill EC$27 million.
“So over the three years, the Government will lose EC$51.8 million and that doesn’t include the corporate income tax reduction, which will cost $2.9 million annually,” Gonsalves explained. He pointed out that the Fiscal Responsibility Framework fixes the percentage of government revenue that can be spent on wages.
Currently, it is set at 14 per cent of gross domestic product (GDP) and will move to 12 per cent by 2026. The total package costs EC$60.5 million over three years. The finance minister described the increase as generous and expressed his pleasure in seeing that the labour movement considered to be fair in agreeing to the increase.
He stated that the increases track with what the various economic forecasters are predicting to be a strong year for economic growth in SVG in 2022.
Gonsalves reiterated that the International Monetary Fund has predicted five per cent growth, but the estimates by the Ministry of Finance and the Eastern Caribbean Central Bank are higher.
Gonsalves told the local media last week that the mandate from the prime minister is that the ministry of finance uses the growth in GDP to take care of the workers, improve public infrastructure, such as roads and to put aside for a rainy day.