ST. GEORGE’S, Grenada, CMC – Prime Minister Dickon Mitchell Friday defended the decision to amend the Excise Act that will increase alcoholic and tobacco products, saying the measure is aimed at raising revenue for the Government lost because of relief measures announced in the 2023 budget statement.
Mitchell had told legislators that the Government could lose an estimated EC$30 million (One Ec dollar=US$0.37 cents) due to the cost-of-living relief measures offered to citizens.
“Given the significant potential loss of revenue by the fiscal measures implemented by this government, this is just one of the many counteracting measures that the government has taken from our fiscal policy to address this,” Prime Minister Mitchell told the Lower House of Parliament as he tabled the amendment.
“The motion about the Excise Tax Act is being moved to support the government’s indication as per the budget presentation and the passing of the Appropriation Act for 2023 as it relates to alcohol and cigarettes and to assist the government in paying for the many fiscal measures that will be implemented in 2023 to address the cost-of-living issues that our citizens face,” he added.
Mitchell, also the Minister for Finance, referred to some areas where the Government will have reduced revenue.
He said these include reducing the petrol tax from EC$5.50 to EC$3.50 and removing certain items from the value-added tax (VAT) list, such as cooking oil, kidney bean, condoms, sanitary pads, spilled peas, adult diapers, baby diapers, toothpaste, toilet paper, and bathing soap.
The Government said the amendment to the Excise Act goes into effect as of February 1, 2023, and will affect both alcoholic and tobacco products.
“Those measures will naturally lead to a reduction in Government revenue, and to offset that reduction, the government’s fiscal policy is to tax goods which are to some extent demerit goods such as cigarettes, for example, and alcohol and which themselves often lead to, if abuse, significant medical challenges for our citizens,” Mitchell said.
He said that when citizens abuse these goods, the State, in turn then, must find the necessary revenue to pay for the care of citizens cares.
“So the policy thinking behind these fiscal measures is, the government should raise revenue by increasing the tax on them to help offset,” he told legislators.
“This will also assist the State with raising the much-needed revenue to address the significant health challenges that we face as a nation arising from the abuse of alcohol which In many cases leads to significant renal failure, and the abuse of cigarettes, which often leads to significant respiratory illnesses,” he added.
The Prime Minister explained that the tax on alcohol would move from EC$1.10 and EC$4.40 per liter to EC$1.50 and EC$5.00 per liter, respectively, and increase the excise tax on cigarettes from 105 to 200 percent.
The amendment to the Excise Act will increase the wholesale and retail price of most alcohol products, including beer, wine, whisky, rum, brandy, vodka, gin, and liqueur, as well as all tobacco and tobacco substitutes products such as cigars, cheroots, and cigarettes.
However, Opposition Leader Dr. Keith Mitchell did not support the resolution referring to his experience enforcing a similar measure back in 1996.
“The fact is, I understand the objective of the Government. It’s an attempt to raise revenue based on the perception that there will be a drop in revenue from other areas,” said Mitchell, whose Government lost the June 2022 general election.
“The problem is whether that objective will be met,” said Mitchell, reminding legislators that his administration had enforced such a measure. Still, it failed to have severe financial positive impacts.
He called on the Government to clarify what goods would be directly affected by the amendment to the Excise Act.
“The motion speaks about alcohol and alcohol-related products, so I think the government needs to make it very clear because there are items that have a serious alcohol content that may not necessarily be part of this, and it must be clarified,” he said.
“For example, you have bay rum, the methylated spirit used for specific things. Even the question sanitizers, some of them are strong alcoholic content, ammonia, for cleaning. I think the Government needs to clarify exactly what products because when the public servants are implementing something, if they are not given a clear demarcation line, then they can sometimes act against what the Government’s intention should be,” Mitchell told Parliament.
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