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Caribbean Islands Revenues
Total revenue in 1985 was US$583 million. The figure was US$240
million short of the expected expenditure, thus creating a budget
deficit equal to 29 percent of the total budget and 11.6 percent of
GDP. In 1985, 84 percent of total revenues came from tax revenues,
comprising mainly income tax, consumption duties, and stamp duties.
In contrast to previous policy, budget deficits were commonly being
financed through external financing. In 1985, over 90 percent of
the funds to pay for the budget deficit came from external
financing, an unusually high percentage. The United States provided
39 percent of external loans, followed by France, Britain, the
Netherlands, Japan, and the Federal Republic of Germany (West
Germany). Multilateral lending agencies also financed a significant
portion of revenue short-falls.
In the mid-1980s, the Seaga government enacted a comprehensive
tax reform package in which it sought to simplify the reporting
system, reduce the number of taxpayers, lessen evasion, and lower
marginal rates; all of these problems were thought to discourage
private sector initiative. The key feature of the revised system,
effective January 1, 1986, was complete tax relief for the first
US$1,500 of annual income for all taxpayers, which was expected to
relieve 150,000 citizens of paying taxes. After the tax-free income
level, all were taxed at a flat rate of 33.3 percent; in addition,
interest on savings was taxed for the first time. Corporate taxes
were also cut to under 33.3 percent during the second phase of the
reform program from a typical top rate of 45 percent. The early
results of the reform indicated that annual tax revenues would
increase as a result of better collection. Other ad hoc taxes
proposed to increase government revenues in the mid-1980s
frequently caused heated political debate. Most controversial were
new taxes for license plates and a proposed annual tax on satellite
dishes.
Data as of November 1987
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